• 06 Mar, 2025 04:00 am

The Elephant in the Room

Question: What are our contributors NOT talking about? Answer: the impact of the most important geopolitical shift in at least 80 years.

If you have cast even a cursory glance over this edition of Financial IT, you could be forgiven for thinking that it is - well - just another edition of Financial IT. 

As ever, our contributors come from a variety of organisations and have key messages about how the world could and should be different at the intersection of technology and financial services. 

So, what are those messages? Diversity, equity and inclusivity (DEI) are too important to ignore. Even relatively simple changes can improve the success rate of e-commerce transactions. Similarly, it is a relatively straightforward matter to make cross-border payments easier. Open Banking, regulatory changes and compliance represent major business opportunities. Usage of Artificial Intelligence by banks should be much larger than it is currently. 

Yet this at a time of an enormous geopolitical shift. Since the inauguration of Donald Trump as President of the United States on 20 January, his administration has returned to ‘America First’ policies last seen prior to the beginning of World War II in 1939.

Here at Financial IT, we would not claim to be geopolitical experts - even though both the United States and the former Soviet Union have long been well represented among our people. Nevertheless, we suggest that the Trump administration has ended the world order that has been in place since the Potsdam Conference of July-August 1945.

This is a much larger change than the fall of the Berlin Wall, the end of Communism in Central and Eastern Europe and the dissolution of the Soviet Union in 1989-1991. It is a much more sudden - and possibly bigger - change than the rise of China as an economic and geopolitical superpower since 1978. The return to ‘America First’ has also been a lot more sudden than the global technological revolution that began with the commercialisation of the Personal Computer in the mid-1980s.

It remains to be seen how other governments respond to a new order where the US government is committed to ‘America First’ policies. By the end of this year, we may have to consider the impacts of ‘Europe First’, ‘China First’, ‘Rest-of-the-Indo-Pacific First’ and ‘Latin America First’ policies. There are many medium-sized countries with several geopolitical options open to them. 

Put another way, we could be returning not to 1945-48, but to 1910 - a world prior to World War I when there were several competing empires that practised ‘Us First’ policies.

All of this gives rise to two questions. First, why are none of our contributors talking about geopolitics? Second, what do the events that have taken place since mid-January mean for companies that supply technology to the financial services sector and for the banks and insurance companies who buy that technology?

We would suggest that the drive for lower costs, better user experience, easier flow of capital across borders, search for innovative technology and embracing of progressive regulation are all positive trends that remain intact. Individually, each of these is dwarfed by the geopolitical shift that has taken place in the last 40 days or so (these words being written at the end of February 2025). Together, though, they represent some challenge and enormous opportunity for the companies that contribute to and subscribe to Financial IT. Collectively, the changes are still greater than the return to ‘America First’. This is particularly true of the opportunity. In other words, our contributors correctly see ‘business as usual’ - and have had very little to say about geopolitics.

If anything, recent events have caused the opportunity aspect to grow. Higher tariffs will make the trade in goods and services harder and more expensive than previously. A number of governments and economies will need to sustain - in very short order - massive increases in defence spending. No-one is advocating the reintroduction of capital controls. Anything that can be done to make money move between people and countries (and within countries) more efficiently and cheaply will be welcome.

Therefore, we make two predictions with confidence. One is that there will continue to be a cacophony of comment - both informed and uninformed - on recent decisions made by the US government. The other is that the latest changes are very good news for most of the players at the intersection of financial services and technology.

Muzaffar Karabaev - Founder, Financial IT