Emerging markets are driving the transformation to digital payments. Whilst wildly adopted in China due to the proliferation of e-commerce, mostly supportive regulation (until recently) and a large target market, electronic payments are now rapidly catching up in other EM regions.

The adoption of the internet, e-commerce and smartphones along with younger; more tech-savvy demographics, ease of use (versus cash) and greater access to financing with changing regulations allowing unbundling from banks all factor into this transformation. Cross-generational adoption of this new technology resulting from the COVID-19 pandemic is likely to be a factor that is here to stay.

Frontier markets, relatively unexplored for many investors, offer an additional opportunity set. Many traditional emerging market countries are now much more developed than they used to be, with more stable institutions and infrastructure. As such, achieving growth at the same rate as they did in previous decades will be difficult for these countries. Meanwhile, financial markets have deepened, communication from authorities has improved and risk premiums have declined, reducing expected returns from investing in emerging markets.

Not only are frontier markets experiencing “catch up growth” from being less developed, but many of them are also benefitting from a demographic dividend, which means that the labour force is temporarily growing more rapidly than the population that is dependent on it, freeing up resources for investment in economic development and welfare.

Join Capital Group's expert panel discussion on these two key trends on November 25. Arthur Caye, Equity Portfolio Manager, Dawid Justus, Equity Portfolio Manager and Kent Chan, Equity Investment Director will offer their thoughts on the transformation to digital payments across EMs and the opportunity set offered by Frontier markets.

Conference website