Emerging markets play leapfrog, but how?

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The smartphone has broken down market barriers and created rapid change in various industries. For emerging market economies, the technology has given consumers a powerful tool, allowing emerging market companies to surpass their developed counterparts in some sectors as they leapfrog traditional business models. In China, mobile applications such as Alipay and WeChat have created platforms that are deeply integrated into people’s lives and, as a result, mobile payments are soaring. In Africa McKinsey forecast that 450 million people will be using mobile banking within the next five years, meaning there is little need for physical branch infrastructure. For remittance flows, mobile applications allow the easy transfer of money, creating significant capital flows from the developed to emerging world as workers send money home. This is an evolution which has only just begun and which will increasingly blur the lines between the developed and emerging world, forcing investors to change how they think about the opportunity set available in the latter.

Colm McDonagh – head of Emerging Market Fixed Income. Insight Investment, a BNY Mellon company

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