I am fascinated by the adoption of new technologies, especially in financial services, which is where I have spent the vast majority of my working life. There are a thousand versions of the picture above, from washing machines to the numbers of users on new blockchains. The curves always get steeper.
We can imagine paths to future scenarios
But I don't think the adoption process can miss out steps. If you want to get to a point where something has happened, e.g. we are all using digital wallets that contain all our credentials, then you have to take all the enabling steps on the way there. You can't miss the important steps out, or it doesn't work. You can see this in developing payment methods across different countries, and even within countries across different segments. Scenario modelling is a way to develop an understanding of where things are going: we create a view of the future, and then ask "how did we get here".
To do this, it helps to recognise how we got to where we are now. When I first used a contactless card to pay, I was buying a coffee at London's Paddington station, having just arrived from South Africa, and catching a train to my parents' house. When I was presented with the card machine, I waved my card over the top, as if it was a magic wand and I was the fairy godmother. It didn't work. As someone sniggered behind me, I was instructed to tap it on top. I hadn't seen anyone doing it before - tap & pay came to the UK before South Africa - and so I didn't know what to do. Imagine being presented in 1990 with a smartphone and being told to use it to access your email. We had to take a lot of steps to get here, and it's a work in progress.
The forks in the path are critical
In building a scenario exercise, you look at the things that have to be true for your scenario to work. The paths to your chosen future have occasional forks in them. It tends to be easier to spot the extensions of the paths that already exist, than to spot where they hit a fork and we have to choose a direction. If you look at a future for digital assets, it is relatively easy to say "well, we need the regulations to be in place, so we need changes to this act, and clarity on this point ...". These are all extensions of a path of regulatory change, which has been running since regulations started, and will continue to do so. The fact that this is the obvious stuff means that this is the most common excuse for not doing anything: "we are waiting for regulatory clarity".
The forks in the path can be harder to identify, both retrospectively, and looking forward. One recurring pattern is a choice between two competing technologies, when the outcome is adoption of one at the expense of the other. The canonical example here is perhaps video tape formats; or maybe it only feels like the definitive version because I remember it in real time. In the simple version, there were two formats: VHS and Betamax. Betamax was superior in some ways, but Sony signed up the owners of movies, which all got released on video (the wait from cinema to video used to be 4 or 5 years, kids!), and so that became what people adopted.
In their scenario of the videotape future, Sony recognised how videotapes were going to be used: mainly for watching movies rather than recording things from TV. For their version of the future, they therefore needed the movies on their format, so that became the key thing to get right. This stuff is a lot less obvious, so "we can't figure out what the future looks like" is a much rarer given reason for not doing anything, although it is probably the most common.
We are at a fork with money & payments
We are in the middle of a competition between different forms of money. In the future, it seems certain that money and payments will be even more digital than they are now. The web3 world will have micro payments for online services, AI agents making payments on our behalf, internet linked devices that pay for services, and so on. What has to be true for this to work? Well, there are the regulatory pieces, but these are extensions of existing processes, as noted above. And regulation will always lag technology. To figure out a scenario for future money and payments, we have to identify the competing formats: VHS vs Betamax.
The tricky part here is that there are lots of different points of competition. There is nation state vs global, fiat vs crypto, traditional vs blockchain rails, commercial banks vs fintechs vs central banks, and so on. I could make a good case for several combinations of those things as the winning model. To move forward, think about what steps you can take now that position you for the likely set of futures. Some decisions you can leave for later. As an example, the tokenisation of money is already happening, and it is easy to see how it leads to the tokenisation of other financial assets and beyond. Let me know if you need evidence to back that up, or just ask Claude or ChatGPT about it.
Competition is between business models, not technologies
So: tokenisation of money is happening. Will that take us to tokenised commercial bank money (deposit tokens), central bank money (CBDC), e-money (stablecoins), cryptocurrency (e.g. bitcoin), or tokenised something else? I think it's probably too early to say, and those things are not mutually exclusive: they can co-exist, and probably will for years. The thing you ought to be doing, as a financial institution of any size, is getting to understand the common factor here: how tokenised money on blockchains works, what you can do with it, how to integrate it to your current business, and what are the implications of it on your business model?
In looking at technology scenarios, this last question is the most important: what is the implication for your business model? We know now that the "movie to video" business was first changed by a better technology - DVDs - but then killed off by a new business model: streaming. My contention here is that streaming is a better analogy for what is going on with money - a new technology enabling a new business model. The DVD business model is the same as the videotape one; streaming changes everything. Fast internet on top of digital content offered a new way of providing video entertainment to consumers. Blockchains and tokenisation on top of financial assets will offer a new way of providing financial services to retail and corporate customers. The fact that this doesn't look as clear as the streaming example is because we don't yet know what the winning models will be; that competition is still in play. As a financial institution, working out how your business model changes is critical.
Doing the hard work of thinking properly about the future is important, and it is becoming urgent too. It should be said that doing nothing is always an option - embedded behaviours take a long time to die off. Many jurisdictions still use cheques, and there are probably people still using video recorders. But in the medium to long term, inaction is probably not a good idea. The future is out there, and so is the past. Pick one.