The Future of Finance BLOOMBERG MARKETS The journal of Global Finance THE FUTURE OF FINANCE VOLUME 29 / ISSUE 6 re InteractiveBrokers FOR INSTITUTIONS Registered Investment Advisors Interactive Brokers’ turnkey custody solution helps advisors build competitive advantage, manage their business with efficiency and serve clients at lower cost. IBKR does not have an in-house advisory team, conduct proprietary trading or compete with you for clients. We offer a low-cost custody solution to advisors of all sizes. Our free portfolio management and CRM platforms, low financing rates and support for best price execution help minimize costs to maximize returns.? In addition, we offer: Y Noticket charges, no custodial fees, no minimums and Y Onboarding support and multiple options for adding no technology, software, platform or reporting fees. clients and migrating to the IBKR platform. YA free, powerful CRM platform that supports clients Y Support for white branded statements, client from almost anywhere in the world and lets you registration and other informational materials. manage the full client life cycle from any desktop or mobile device. ¥ Advanced trading technology, including a pre-trade allocation tool that lets you allocate block trades Y¥ Flexible fee structures and automated client billing to to multiple clients with a single mouse click and simplify the fee administration and invoicing process. an Advisor Model Marketplace for simplifying the management of client assets. Y Free access to PortfolioAnalyst, our easy to use tool or consolidating, tracking and analyzing clients’ total Y Access to the IBKR Client Risk Profile risk scoring inancial health. system for understanding client risk tolerances and Greenwich Compliance for registration and Y Global access to stocks, options, futures, currencies, compliance support. bonds and funds, and support for clients from more han 200 countries and territories from a single integrated master account. TYPE INTB <GO> To find out more, contact an IBKR representative by calling toll-free: +41 41 726 9689 or by visiting: ibkr.co.uk/ria Interactive Brokers (U.K.) Limited is authorised and regulated by the Financial Conduct Authority. FCA Register Entry Number 208159. Your account is cleared and carried by Interactive Brokers LLC and for certain limited products by Interactive Brokers (U.K.) Limited. Interactive Brokers LLC is regulated by the US SEC and CFTC and is a member of the SIPC (www.sipc.org) compensation scheme. Only FCA-regulated products carried by Interactive Brokers (U.K.) Limited are covered by UK FSCS. Certain financial products are not suitable for all investors. Customers should read the relevant risk warnings before investing. Your capital is at risk and your losses may exceed the value of your original investment. [1] Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020. For more info, see ibkr.com/info [2] Lower investment costs will increase your overall return on investment, but lower costs do not guarantee that your investment will be profitable. Supporting documentation for any claims and statistical information will be provided upon request. For more information, see ibkr.co.uk/info 10-IB20-1391CH1349 Contents Bloomberg VOLUME 29 ISSUE 6 DECEMBER 2020 / JANUARY 2021 Markets COVER ARTWORK BY KRISTINA COLLANTES 12 Corrections to the Oct./Nov. issue: In “Has the Pandemic Ended Our Obsession With Economic Growth?” Darrick Hamilton’s title and affiliation on page 11 were incorrect. He is University Professor and Henry Cohen Professor of Economics and Urban Policy at the New School. In the chart on page 76 should ave shown that neither Brazil nor Mexico has cut its benchmark rate below zero. Fintech Runs Into Red Tape Digital finance’s regulatory advantages may be coming to an end By Elisa Martinuzzi 14 A Cultural Awakening Financial leaders have a chance to fix the corporate cultures they're seeking to preserve By Sree Vidya Bhaktavatsalam 50 The Future of Finance A look at the data that show where the industry is really heading By Fenny Surane, Sridhar Natarajan, and Larry Tabb 54 Can Antrepreneurship Survive? Three former Ant Financial executives were plotting their next acts when China changed the rules By Lulu Chen 60 The Prodigy How Yoyo Chang, a 20-year-old college student, won backing for his payments startup By Edward Robinson “The Crisis Fighters,” 66 China's Bond Market Opens Up The world’s second-largest economy is preparing to let more foreign money come in. What could go wrong? By Chris Anstey and Enda Curran 72 Q&A With Citigroup's Jane Fraser The future CEO talks about how she shattered banking’s glass ceiling and what comes next By Fenny Surane Contents 8 QuickTake Understanding the money of tomorrow 10 Surveillance How has the pandemic changed finance forever? 16 <GO> Twilight of the Bank Branch U.S. lenders are scaling back on bricks and mortar 26 Ripple Effects Examine how free trades flow through brokerage firms’ earnings 42 Seamless Teamwork Notes functionality can improve remote collaboration 28 Faster Bond Analysis Cutting-edge tools for a more efficient fixed-income workflow 47 Latin American Debt Monitor Automated insights ensure you never miss a key market move 33 Green Guarantee Make sure that ESG investments meet Europe’s requirements 18 SPACs in Focus Track the boom in capital raising and dealmaking 36 Gender Mix Find hedge funds that own stocks with majority-women boards 48 Banking on Black and Latino Customers Q&A with the founders of finance startup Greenwood 78 Resolutions for 2021 Three finance leaders reveal their goals 20 Dividend Forecasts Map the Covid recovery by monitoring where payouts are rebounding 38 Simplify the News Key Themes make it easier to detect the signal in the noise 719 Cheat Sheet The most important functions you should know about right now 22 Smarter Portfolios Optimize your investments for growth 40 Better Benchmarks New indexes can help you build a currency value trade 80 FFM Quiz Test your market smarts STATEMENT OF OWNERSHIP, MANAGEMENT, AND CIRCULATION Publication title: Bloomberg Markets Publication number: 1531-5061 Filing date: Oct. 30, 2020 Issue frequency: March, May, July, Sept., Nov., Dec. No. of issues published annually: 6 Annual subscription price: Not applicable Complete mailing address of known office of publication: Bloomberg L.P., 731 Lexington Ave., New York, NY 10022 8. Complete mailing address of headquarters or general business office of publisher: Bloomberg L.P., 731 Lexington Ave., New York, NY 10022 9. Fullnames and complete mailing addresses of publisher, editor, and managing editor: Publisher: Bloomberg L.P., 731 Lexington Ave., New York, NY 10022; Editor: Christine Harper, Bloomberg L.P., 731 Lexington Ave., New York, NY 10022; Managing Editor: Kristin Powers, Bloomberg L.P., 731 Lexington Ave., New York, NY 10022 10. Owner: Bloomberg L.P., 731 Lexington Ave., New York, NY 10022 11. Known bondholders, mortgagees, and other security holders owning or holding 1 percent or more of total amount of bonds, mortgages, or other securities: None 12. Not applicable 13. Publication name: Bloomberg Markets 14. Issue date for circulation data below: September 2020 15. Extent and nature of circulation: Nogponer a, Total number of copies (net press run) 336,281! b. Legitimate paid and/or requested circulation: (1) Paid/requested outside-county mail subscriptions stated on form 3541 130,621" 120,528 (2) Not applicable 326,069? (3) Sales through dealers and carriers, street vendors, counter sales, and other non-USPS paid distribution 197,567! 199,224? (4) Requested Copies Distributed by Other Mail Classes Through the USPS (e.g., First-Class Mail®) 3 4 c. Total paid and/or requested circulation [sum of 15b(1), (2), (3), and (4)] 328,191 319,756? d. Nonrequested distribution by mail (samples, complimentary, and other free) (1) Outside-county as stated on form 3541 si 55? (2) Not applicable (3) Not applicable (4) Nonrequested distribution outside the mail (carriers or other means) o oO e. Total nonrequested distribution [sum of 15d(1), (2), (3), and (4)] 81" 55? f. Total distribution (sum of 15c and 15e) 328,272" 319,811* g. Copies not distributed 8,009! 6,258? h. Total (sum of 15f and 15g) 336,281" 326,069? i. Percent paid and/or requested circulation (15c divided by 15f times 100) 99.98%! 99.98%? 16. Electronic copy circulation: a. Requested and paid electronic copies $7,173 60,0107 b. Total requested and paid print copies and requested/paid electronic copies (sum of 15¢ and 16a) 385,364" c. Total requested copy distribution and 379,766" requested/paid electronic copies (sum of 15f and 16a) 385,444! d. Percent paid and/or requested circulation 379,821? (both print and electronic copies) (16b divided by 16c times 100) 99.98% 99.99%? 17. Publication of Statement of Ownership for a Requester Publication is required and will be printed in the December 2020 issue of this publication 1 Average no. copies each issue during preceding 12 months. ?No. copies of single issue published nearest to filing date. | certify that all information furnished on this form is true and complete. —Christine Harper, Editor 10/30/2020 OL LOCHOO OOOE <Cececcceccenes % y we nee00 0000 ‘440 eecceecccoe %&e re 'U DIDO DEPP EP DOP ObOOOO1 TY 19 700 ag OOO ’ qet we yD LBOOLOD APHAAII VON o£ CONNECTED Innovative technology that breaks down silos JU] 0) ol \Varod al-] lal X=Xol alate) Kore val celal ha ol=1al=)acel- 1M al=1amiaxece) alal-\ois-w'col0 mY (ol0] a16] 6) 0) i[-1a-m-]ale| raat-lalelicleade|aq=\e-mntcel Olan de-lal-jele)ac-ld(elamal-1a)\e) a <yar-]a lem’ (ole] mel kive)aal-1acmcole(-14al-] ay Vale al=1al implemented, the technology integrates with your current systems, creating a continuous web to. capture data that creates business intelligence and predictive analytics. That’s why, at Ryder, our technology RyderShare™ connects your supply chain more than ever before rValomolull (ok-w- Melle lit-]ip4-Yom al-1ayVcelaae wath pom plete wae F-Yol CosS9A 1010] ake) oX=1¢-14 (0) gm DI Xexo)Y(-1 al aLehUY Rye Sppely (@laF-TlaWsre)\ehdle)atcmer- lau aal- u Ever better” at ryder.com/everbetter. 4 ee, LeMat fe ae: labs ele)ac-ldlelami-lavi(e--mcal-)en elehmnycelelarie]e)e)\vmelal-llamlamaareld(olal A at=sa allan hance My ale] (ms oy-] (ci um<-)1(-1¢-] maa Ulel 4 (oy-Lol-w-eol-\VAmeo) au aat-lar-le}ialem-m ela iV-]<-mi(-t-sar-laleme|dii-1 ar VolU Mal =t=xe Mn g-] aly ele) at- | dle) amcy=) avi (Xm val- | a(x) om {olU| muia-s(e]aler-lavem oluriial-smaaten {lalemiolayiclac mm aiaa FVaM-\aldig-m ole) gace)ilome)mdg-lars ele)ac-id(e)am-laule-md alien acellule(-smaa-1(e)alalaat-lar-lei-lanl-lalatom eo) ge) (1e-leloe idgu(ol,dloy- lo met-] oy-Leliq’ mde lary exelae-ld (ela aar-latcle[=Jaal-ialem-lalemel=re|(er-le-1eMee-lalsj ele)at-hd(o)a mm nace (yam al=1 | ess you reduce freight costs, improve service levels, and drive efficiencies while getting your fe Torelemcomexolal-ielaal-1e-molaba’|aqi-m-lale Mia taie) | em Iie \{-1 au alonWval parcel aml e- lal) ele) ae- 1410) alesi-) aV{LeX=sMer-) al make you Ever:better”” at ryder.com/everbetter. Tea Ever better.’ Ever better CRyder & ce ADVERTISEMENT Driving Business Forward: Three Trends Impacting Supply Chains During Covid-19 Virtually no business has escaped the supply chain disruptions wrought by the coronavirus pandemic. In March, 95% of companies said that their supply chains had been or would be disrupted by Covid-19. But in the eight months since the pandemic’s emergence, forward-thinking businesses have been able to strengthen their supply chains and seize the opportunity to prove their dependability to their customers. Covid taught companies that they need to be flexible and quickly adapt to changing conditions across both their supply chains and transportation networks. Those that have managed to do so are poised to thrive, not only for the duration of the pandemic, but also in the “new normal” that lies on the other side of it. Here's a look at three trends shaping supply chains now: Diverse, regional supplier networks have never been more important. At the height of disruption last spring, companies that fared the best were those not dependent on a single supplier, and those in geographic proximity to their suppliers. “Step one to a resilient supply chain is not having all of your eggs in one basket, and step two is being in the region with your suppliers, as much as you can be,” says Steve Sensing, President, Global Supply Chain Solutions, Ryder System. “When the pandemic came, those companies that were positioned locally were in a much better position. An outsourced transportation network can be acompetitive advantage. As business needs to shift instantaneously during these uncertain times, companies must be able to rely on their fleets to meet quickly changing demands. Ryder proved its reliability last spring when shipments to its consumer packaged goods (CPG) customers skyrocketed 150% as they stocked up on everything from toilet paper to thermometers. At the same time, as many of Ryder’s automotive clients shuttered temporarily due to shelter-in-place orders, Ryder was able to redirect its thousands of trucks, tractors, trailers and drivers from automotive routes to CPG runs. “That flexibility allowed us to support those food-and-beverage customers and keep those trucks running to their warehouses and to their retail storefronts,” Sensing says. The shift to e-commerce has accelerated, along with customer expectations. Customers nervous about visiting stores during the pandemic have shifted more of their shopping to e-commerce, with sales expected to reach nearly $800 billion this year—a 32% increase over last year anda figure analysts didn’t expect to see until 2022. More than a thousand new retail customers have turned to Ryder since the pandemic hit to help them meet increased demand, particularly because consumers still expect total transparency in the status of deliveries. This is provided by Ryder’s RyderShare™ platform, which allows retailers to give their consumers real-time insight into the location and expected timing of each delivery. “Having that real-time visibility—to know exactly where the product is and when it will arrive—is critical to our customers and our operations team,” says Sensing. Ryder Last Mile delivery service also benefits retailers shifting into e-commerce, providing delivery of bulk items at whichever level a retail customer prefers—from simply dropping them inside the consumer's front door to a full-service setup. Reactive data and technology evolve to become more predictive. In addition to providing transparency around delivery, the RyderShare™ platform also generates valuable data, which Ryder uses to automate its warehouses and find other cost savings for customers. “It’s helping us drive more waste out of the system and be more effective in moving out customers’ product on the right transportation mode and carrier,” Sensing says. While challenges remain as businesses rebound from the effects of the pandemic, ample opportunities exist for agile enterprises. Companies with operational flexibility, reliable partners and a focus on efficiency will adjust—and flourish— as the new normal takes shape. Learn more at www.ryder.com Sponsored by CAyder Editor’s Letter The Future Of Finance Editor Christine Harper Design Director Josef Reyes Features Editor Stryker McGuire <GO> Editor Jon Asmundsson Special Reports Editor Siobhan Wagner Graphics Editor Mark Glassman The Covid-19 pandemic is a humbling reminder of how suddenly plans can be upended, but we'll never stop trying to look ahead. This issue, produced with Bloomberg News's global finance team, led by Executive Editor Caroline Gage, brings you a few people and trends worth watching. In February, Jane Fraser will become Citigroup Inc.'s chief executive officer and the first woman to run a major U.S. bank. She talked with New York-based finance reporter Jenny Surane about her career and plans in “I’ve Had to Think Differently” (page 72). In “Can Antrepreneurship Survive?” (page 54), Asia investing team leader Lulu Chen profiles three executives who left Jack Ma’s tech empire to start their own companies, and examines whether that kind of entrepreneurship will still be able to thrive in China’s climate of tighter regulation. In the U.K., 20-year-old Taiwanese college student Yoyo Chang has surprised Bloomberg Markets draws on the resources of Bloomberg News, Bloomberg TV, Bloomberg Businessweek, Bloomberg Kristin Powers Intelligence, Bloomberg Economics, Copy Chief BloombergNEF, and Bloomberg LP. Lourdes Valetiano Editor-in-Chief Copy Editors John Micklethwait Production Manager Susan Fingerhut Deputy Editor-in-Chief Reto Gregori Managing Editor Marc Miller, Brennen Wysong family and friends by building a payments startup with high-profile backers, a story chronicled by London-based reporter Edward Robinson in “The Prodigy” (page 60). As China opens its bond market to foreign investors, the country’s power in the financial markets could soon rival its impact on trade and manufacturing. In “Opening Up” (page 66), Chris Anstey and Enda Curran examine the potential consequences. In “The Future of Finance” (page 50), reporters Surane, Sridhar Natarajan, and Bloomberg Intelligence’s Larry Tabb show in graphics where money is being made. We hope you find this issue illuminating. As always, we welcome your feedback. Christine Harper, Editor Production/Operations Steven DiSalvo, Debra Foley, Thomas Gambardella, Annmarie Gentile, Dan Leach, Daniel W. Murphy, Carol Nelson Global Head of Advertising and Marketing Stephen Colvin Head of U.S. Sales Map Manager : Advisory Board at Sone Anthony DeMaio Chris Collins, Stephanie Flanders, . . Head of APAC Sales Heather Harris, Caroline Gage, Production Associate Mark Froude David Gillen, Chris Nagi, Loly Chan Head of Europe Sales ee? pone Ein Ross-Thomas, Duncan Chater oe Weisen’ Creative Direct Head of Middle East EEATIVE ILECLOE and Africa Sales Christopher Nosenzo Amit Nayak Photo Director Donna Cohen For advertising inquiries go to bloombergmedia.com [email protected] eT Cod iT fe E-commerce fulfillment that delivers where your customers are a Mal=mw enero) alielaal=1ecmialo) om at-lme]\-1am elem aali dco) aime) mi Ko) ¢-mige)lalem lalate) sal [elgem colada) No al-la (ote Mai eae] CXoMel c-r-]¢-1oM gall itce) ame) miei cnlltaat=laley ox-1ae-)aalmdal-1qnycole Mal-\-l0Mcoml a-t-lolal-(ecel[a-1¢-1h'7 Taro MMidallamaomer-\ ew aA'(ol-1emelo | at-execolaalaal=1ce-mib tal (lan (-jahacvolle lure) acy (=) g-m o] 6] inqn col, ¢-1-1 0) V{o}8 [amie] eo) olNymel at-lam=\\cel dale eAvaleMY.-MeoMiam Ulta melalaat-1celal-\em-voroie] g-\on’ame) ahid [eal-Wel-l0hV(-1 ava Tayo ict a hy r-Load (ola par-] | CoM Vl ale Miele mcom celel emo) amel gen fale Mxele| ae) ol=1e-14(e)a nm DI IXele)'(-) al ale) WV na\fel-1g E-commerce Fulfillment Solutions can make you Ever better™ at ryder.com/everbetter. QuickTake The Money Of Tomorrow By OLGA KHARIF AS THE WORLD becomes more digital and decentralized, will the same be true of money? Banks and central banks are trying to keep up with innovations that threaten their very existence. Here’s a guide to some ideas that could transform the world of finance. —With Alastair Marsh, Carolynn Look, and Ryan Williams Central Bank Digital Currencies (CBDCs) Central banks already deal with electronic versions of money, but a digital currency could extend some services that central banks provide to financial institutions to the public at large. A broadly used digital currency could mean payments clear more rapidly and make banking services available to the estimated 1.7 billion people around the world who lack them. The People’s Bank of China, the most aggressive of the large central banks, has held trials involving e-wallets in a few cities. Transactions with central bank currencies wouldn't be anonymous—that would make it easier for governments to crack down on money laundering and tax evasion and, as privacy advocates note, give them a powerful new tool for surveillance. The PBOC and other central banks sped up their efforts after Facebook Inc. anda slew of collaborators last year unveiled plans for a digital currency called Libra. For central bankers, currency isn’t merely an economic issue; it’s about sovereignty. DeFi What if computer code could take the place of bankers? That’s the goal of the decentral- ized finance, or DeFi, movement that’s grown out of a decade of experimentation with cryptocurrencies. A DeFi world could be one where money flows more efficiently and cheaply, its proponents say, and would create new ways for savers to earn money on their holdings. Critics say DeFi is more likely reinventing the hype, wild speculation, and money-losing possibilities of crypto. DeFi revolves around applications known as dapps that perform financial functions on digital ledgers called blockchains. Dapps let people lend or borrow funds from others, go long or short ona range of assets, trade coins, or earn interest in a savings-like account. The trans- actions are governed by rules embedded in the software called smart contracts. Like everything else in the realm of digital curren- cies, or software in general, DeFi accounts can be vulnerable to hackers. Even buggy code can destroy value. Users wiping themselves out by accident is dismayingly common, too. Kharif covers cryptocurrencies for Bloomberg News in Portland, Ore. Yield Farming When you deposit money in a bank, you’re effectively making a loan that earns interest. Yield farming, or yield harvesting, typically involves lending cryptocurrency in return for interest and sometimes for fees, but more importantly for handouts of units of anew cryptocurrency. The real payoff comes if that coin appreciates rapidly. The most basic approach is to lend digital coins, such as Dai or Tether, through a dapp such as Compound, which then lends the coins to borrowers who often use them for speculation. Interest rates vary with demand, but for every day’s partici- pation in the Compound service, you get new Comp coins, plus interest and other fees. If the Comp token appreciates—it almost doubled in value in June—your returns skyrocket as well, though a crash shortly thereafter showed the risk that accompanies the hoped-for reward. Dex A decentralized exchange, or dex, is a set of software protocols that buyers and sellers can use to find each other and carry out transactions through smart contracts, which are self-executing agreements. Teams of devel- opers set up dexes that then run on their own. Their use has ballooned this year, largely as a result of an explosion in the issuance of DeFi coins used in yield harvesting and other schemes promising huge returns. Unlike many centralized exchanges, most dexes have welcomed new DeFi coins with open arms, letting them list with little scrutiny and for free. As these coins (including Comp, Dai, and SNX) garnered followers, so did the decentralized exchanges willing to host them. But along with the risks of hacking that all exchanges face, it remains to be seen whether regulators will let dexes—with their reluctance to check users’ identities—carry on with their wide-open oper- ating style if they continue to grow. Governance Tokens In a decentralized enterprise, who gets to decide all the many things that get decided? In big disputes over the future course of Bitcoin, for example, whoever gets the most computing power on their side often wins, though the losers sometimes split off their transactions to create, in effect, a new cur- rency, such as Bitcoin Cash or Bitcoin Gold. To avoid that kind of messy battle without creating a central authority or entity, a slew of new crypto projects is instead relying on so-called governance tokens for decision- making. They're often issued to regular token users, or with investments in Libra or other projects. Holders can vote on the project’s strategy and any other issues that come up. The ideais to govern projects via a distributed network of stakeholders. There’s also the hope of making a newly minted variety of cryptocoin more attractive. If the arrangement seems reminiscent of the votes that come with shares of stock, that’s on purpose. A big question is whether the U.S. Securities and Exchange Commission will deem governance tokens to be so much like equity shares that it will require startups to go through a formal public offering—a hurdle that all but ended an earlier craze of raising money through ICOs, or initial coin offerings. BLOOMBERG MARKETS