Top of main content
Image of a man checking the servers.

Investing in the Digital Economy

Investment tips
This insight is about
Technology
Digital
Investing
Innovation

Investing in the Digital Economy

by Brett Mitstifer - Head of Discretionary Investment Management, HSBC Private Banking, Americas

As technology and economic growth become increasingly linked, not investing in digital capabilities is now a significant risk.

While digital innovation and transformation have been underway for decades, the volume and speed of recent technological advances is accelerating transformation across all aspects of society, with significant impact on economic sustainability. Looking at the disruptive impact of the COVID-19 pandemic, it's clear that many of the trends that came into play as a result, have the potential to permanently alter the global business and economic landscape.

As technology and economic growth become increasingly linked, it's critical that technology investments generate revenues, drive productivity and reduce cost. This imperative is heavily influencing investments across the spectrum of consumer services, business services, infrastructure, logistics, healthcare, financial services, and other sectors. Economists commonly refer to the concept of creative destruction; wherein, with each recession, those parts of the economy that break down are replaced with new innovations that move the economy forward. In the case of COVID-19, creative destruction is in the spotlight. The profound changes we are seeing as a result of this disruption will likely impact the way we work, play, learn and interact well into the future.

In the early days of technology evolution, developers focused on task implementation: word processing, data manipulation in spreadsheets, data transmission, etc. New functionalities were born and the technologies permeated homes, businesses and institutions, but for a long time, the amount of true innovation was limited. Cyclical forces such as the employment rate and capital spending influenced the ebb and flow of spending on new technologies, considered a risk within the broader economic context.

However, with more recent advances in digital capabilities, including web-based software, powerful smartphones, artificial intelligence, Big Data, 5G and streaming, technology adoption has become pervasive and productivity enhancements are quite significant – making technology a secular growth trend.

Now, not investing in digital capabilities is a significant risk.

Innovation, Growth and Disruption – Five Key themes

The companies that will succeed in this environment can span sectors, industries and product groups across the economic landscape. Some will create structural growth by delivering innovative products and services that utilize digital technologies. Others will develop disruptive technologies that upend how long-established businesses provide services to their markets. Still others will deliver solutions that anticipate and address shifting consumer and corporate demand as individual and company behaviors evolve.

What unifies the opportunity for all of them is a set of drivers that will shape how they respond to digital innovation.

  1. Digital Consumer – Consumer expectations and consumer behavior have shifted dramatically as all aspects of our lives can be captured, organized and facilitated via digital technologies. eCommerce, Social Media, Advertising and Streaming are just some of the examples of how the landscape has been disrupted, forever altering how people access and interact with information and content, and how those who are sharing information are taking feedback on that content.
  2. Digital Services – More and more companies and institutions are using technologies such as cloud computing, SAAS, Artificial Intelligence, Big Data and Remote Access/Remote Working to drive productivity during an incredibly challenging time. Whether you are a provider or a user of services, the services of today and the future look quite different from how they looked a decade ago.
  3. Infrastructure – infrastructure lies at the center of the digital eco-system as the speed and volume of activities accelerate. Semiconductors, Handsets, 5G, Data Centers, Towers, reliable power generation, etc. all play a crucial role in support of consumer and corporate demands.
  4. Fintech – Electronic and Contact-less payment activity has been growing for many years and the COVID-19 pandemic has re-accelerated a focus on the cash-less society. Advances in algorithms and AI are leading to new products for mortgage origination, insurance, security trading and investment advice. As financial services firms seek to offer services to younger members of society (Millennials), the mechanisms and the safety of the delivery of services must evolve to meet their demands.
  5. Healthcare – the medical field certainly came into the spotlight as a result of the COVID-19 pandemic, and continues to transition toward greater utilization of digital technologies in the fields of tele-medicine and medical records, diagnostics and testing, genetics, robotic surgical procedures, and research data.
Public vs Private Markets
 
For startup companies developing innovative, cutting-edge digital technologies, there's an increasing amount of private capital available from Angel, Venture and Private Equity investors – both in the early stages of development and in subsequent rounds of raising capital. Companies that can successfully navigate multiple rounds of capital raises can afford to wait longer before entering the publicly traded markets. Once they do, they are further along with development of their products and services and can often demonstrate greater sustainability and credibility, as well as a clearer path toward profitability. For investors, this means that they can seek to capture early stage returns from the private markets, before turning to the public markets.
 
Post Covid-19 World
 
While the pace and duration of the current pandemic remains unknown, the landscape for adoption and utilization of digital products/services is likely to be forever altered. We have seen in so many instances that the path to a resilient economy, during uncertain times, is through innovation and adaptation. This path to the future runs through many sectors and industries, but it's likely that those best situated to leverage digital solutions will experience the greatest success.


This communication is produced by HSBC Private Banking, a division of HSBC Bank USA, N.A.

 

Where your location of residence differs from that of the HSBC entity publishing this communication, please refer to the Cross Border disclaimer at https://www.privatebanking.hsbc.com/disclaimer/cross-border-disclosure/.

 

This communication is provided to you for informational purposes only and is not a recommendation, offer or solicitation to purchase or sell any service, product, security, commodity, currency or other instrument. This communication does not consider your specific objectives, circumstances or needs, does not provide legal or tax advice, and does not identify or define any or all of the risks that may be associated with the purchase of products or services described herein. The information contained herein should not be construed as investment advice or a recommendation to purchase the products or securities described herein. Prior to making a financial or investment decision, you should conduct such investigation and analysis regarding the products described herein as you deem appropriate and to the extent you deem necessary obtain independent advice from competent legal, financial, tax, accounting and other professionals. No person is authorized to use this communication for any purpose other than the purpose stated above.

 

The information contained in this communication is derived from a variety of sources we believe to be reliable; however, we cannot guarantee its accuracy or completeness, nor shall we be liable for any incidental or consequential losses or damages including but not limited to errors (including errors of transmission), inaccuracies, omissions, changes in market factors or conditions, or any other circumstances beyond our control. The information, analysis and opinions contained herein constitute our present judgment which is subject to change at any time without notice.

 

HSBC Private Banking is the marketing name for the private banking business conducted by the principal private banking subsidiaries of the HSBC Group worldwide. In the United States, HSBC Private Banking offers banking services through HSBC Bank USA, N.A., trust services through HSBC Bank USA, N.A., Delaware trust services through HSBC Bank USA, N.A. – Delaware Trust Office and HSBC Trust Company (Delaware), N.A., securities and brokerage services through HSBC Securities (USA) Inc., member NYSE/ FINRA/SIPC and an affiliate of HSBC Bank USA, N.A., and traditional insurance products through HSBC Insurance Agency, (USA) Inc. affiliate of HSBC Bank, USA, N.A. HSBC Bank USA, N.A. is a Member FDIC. Private Banking may be carried out internationally by different HSBC legal entities according to local regulatory requirements. Some services are not available in certain locations.

 

Investment and insurance products are: Not a deposit or other obligation of the bank or any affiliates; Not FDIC insured or insured by any federal government agency of the United States; Not guaranteed by the bank or any of its affiliates; and are subject to investment risk, including possible loss of principal invested.

 

HSBC Private Banking does not provide legal, tax or accounting advice. Please consult with your professional advisors before making any financial decisions.

 

Copyright © 2022 HSBC Bank USA, N.A.
ALL RIGHTS RESERVED
  Back to the top Back to the top

Related Insights

Connect with us

 
Listening to what you have to say about services matters to us. It's easy to share your ideas, stay informed and join the conversation.