Technology Investment Trends: TMT 2022

The Metaverse, Fintech Payments Systems and Industry Consolidation emerged as top technology trends at Morgan Stanley’s Technology, Media and Telecommunications (TMT) Conference, held in San Francisco this month. -this.

“Innovation happens around the metaverse, and winners and losers will come out of it,” says Umi Mehta, global head of internet banking at Morgan Stanley. “The volume around it and the novelty scares people away, but it affects e-commerce, payments and collectibles and will be part of life in the future.”

As innovation continues to create new value for consumers and investors, Mehta says, “tech companies are getting bigger and have more software, hardware, cloud and entertainment. They have their wishlists of assets and teams to acquire. Here are the trends to watch right now.

When it comes to investing, the largely uncharted terrain of opportunity is the burgeoning online realm of the metaverse, which is now on the minds of companies and dispatchers inside and outside the tech industry. according to Mehta. “Effectively your online digital ID, the metaverse has applications even outside of gaming. With internet 2.0 and now 3.0, there’s a lack of trust because a lot of people don’t understand it, but the basics are getting train,” he says.

You can’t have the metaverse without blockchain technology, which records transactions, usually in a decentralized public database called a crypto-secure ledger. It makes possible the purchase of cryptocurrency, artwork or music (in the form of non-fungible tokens or NFTs). “Blockchain technology has horizontal application across industry, and many parts of the global economy could be fundamentally redesigned,” says Brittany Skoda, global head of Software Banking, who also specializes in blockchain and cryptocurrencies.

With the blockchain enabling monetization of the metaverse, companies are crowding in to facilitate and create digital assets to buy. Some of the biggest tech companies are expanding their online platforms where people can work, play games and socialize, while well-known consumer companies are creating NFTs to sell. On platforms that sell digital land, brands are also creating online versions of their stores.

Creating metaverse versions of stores or goods typically costs less than creating physical products or spaces, a boon for brands and content creators. “As a collector, you can buy a pair of sneakers for $100 in the digital world, and they might cost the same in the physical world, but it’s not expensive to make these digital sneakers,” Mehta explains. “The Metaverse makes it easier to build margins,” prompting companies to view the Metaverse as a new part of their total addressable market, and investors are taking notice.

The tech M&A market is heating up due to three key factors, according to Mehta. The first is that, across industries, companies continue to show interest in acquiring technology, as they pursue the online transformations that have accelerated during COVID-19. The second is that new blockchain and metaverse opportunities are also fueling business appetite for digital expansion through technology.

“It all starts with the infrastructure,” says Skoda. “The build-vs-buy debate is a hot topic among big tech and exciting new startups focused on blockchain and blockchain-enabling infrastructure.” It doesn’t stop at infrastructure, adds Skoda: “As we see this infrastructure proliferate, there are so many exciting applications, gateways and tools that have gained traction and are now key strategic targets. in this new ecosystem.”

Particularly for companies that can scale efficiently, such as software, internet, and semiconductor companies, “mergers and acquisitions can provide greater reach, product range, wider distribution, and better data,” said Owen O’Keeffe, global head of technology mergers and acquisitions. The regulatory environment, however, is a potential uncertainty: “There will be continued increased scrutiny over larger technology transactions, but ultimately many mergers and acquisitions have benefited end users of technology, and we therefore expect a robust level of activity to continue and potentially accelerate.”

The third factor that is further fueling interest in tech mergers and acquisitions is recent market volatility. Private companies planning to go public are largely barred from going public due to price uncertainty caused by inflation fears and the Russian-Ukrainian conflict. “Last year, 20% of my time was spent on M&A and 80% on IPOs, and this year it’s the other way around: it’s been a massive change in a short time,” says Mehta.

Both in the real world and in the virtual world, payment technologies are in high demand across all industries, changing the landscape of financial services. “FinTech is everywhere,” says Jigar Patel, Head of FinTech Banking, “with businesses and investors constantly finding new use cases” and showing strong interest in these three areas of fintech:

  • Integrated financial services: Many non-banking businesses now offer or plan to offer financial services to monetize payment transactions as part of their core business, build customer loyalty and increase lifetime value. “Some of the biggest companies have massive consumer bases, and they’re using payments and subscription services to monetize them in a way that adds value,” Patel says. “Payment flows are an opportunity to increase revenue penetration of an existing customer base.”
  • Cross-border payments: Payments technology is democratizing financial services, especially for businesses of all sizes looking to sell or buy globally. According to Stephen Gerson, head of payments technology, these companies have traditionally depended on large money banks whose products are tailored to the needs of their biggest customers. “Growth-stage businesses often need help navigating between customers and suppliers in different currencies and markets without being too costly. We’ve seen an increasing focus on strategies to scale payment systems that enable all companies to operate globally, regardless of size.”
  • Digital wallets: Transferring money seamlessly between individuals has become so widespread that digital wallets now have as many account holders as some major banks have depositors, and these payment systems still have significant leeway to penetrate new markets, says Gerson. Digital wallet companies are best positioned to serve largely untapped opportunities like the Metaverse: “FinTech is at such an early stage compared to the Metaverse. Businesses and consumers will have a variety of new tools to pay for digital goods,” he says.