market size

Analysis of User Base and Money Supply in Popular Virtual Economies

Autonomous Next has estimated the money supply and user base of popular virtual economies in the period between 2014-2016. Our research provides insight into virtual currencies that existed before Bitcoin in four popular games of the 2000s, including: (1) Runescape, (2) World of Warcraft, (3) EVE Online, and (4) Second Life.  Companies developing these worlds act like a central bank issuing a digital money supply to keep functional economies of entirely virtual activity. Our findings show that World of Warcraft held the largest user base at 5.5 million players and a money supply equivalent to $10 million USD. Meanwhile, Second Life managed a significant money supply of $40 million USD and a user base of merely 0.9 million. Linden Labs, the creators of Second Life, even claims that the GDP for their virtual world was equal to $500 million USD in 2015. Lastly, Runescape and EVE Online held a user base of 1.3 million and 0.5 million respectively and a money supply equivalent to $2 million USD and $18 million USD. This phenomenon shows how entirely digital tokens that represent utility value in a virtual world can have both utility value and speculative value, as some traded on vibrant exchanges.

Size of Investment and Wealth Management Market

Autonomous Research has estimated the size of the US wealth management industry to be $376 billion in revenue in 2016. This figure is derived from investable assets of $37 trillion, which are defined as household net worth less illiquid assets such as residence and private company shares. The resulting industry pricing is slightly below 1% in fees across the ecosystem. Investable assets are derived based on the distribution of households in the United States, of which there were 124 million.

The overall market is separated into the following segments: (1) retail households with <$100k, (2) emerging affluent households with $100k-250k, (3) mass affluent households with $250k-1mm, (4) high-net worth households with $1-10mm, and (5) ultra high-net worth households with $10mm or more. Different firms use slightly different terminology and cut-offs for these populations. Our methodology reflects how most industry participants structure their service offerings and channels to target the quantified segments. The first chart shows households, investable assets and revenue pools by household segment.

On the second chart, we looked at the asset management side of the equation. Asset management is the manufacturing part of the investment management industry. Within fund management in particular, we find an 8.3% CAGR between 2008 and 2015, which is the period defined by the recovery from the financial crisis. For the same period, exchange traded funds grew at a 21.7% CAGR. The story that passive index investing and ETF investing have grown faster than the rest of the industry is shown here quantitatively. Whereas mutual fund growth is beginning to stall, ETF growth continues to expand.

 

Analysis of Technological and Regulatory Pressure on Global Capital Markets

Autonomous Research has quantified the rising regulatory and technological pressure in global capital markets. Since 2010, we have found a gradually decreasing revenue pool across (1) FICC, (2) Equities and (3) IBD. The CAGR across these divisions stands at -3.4% for the period between 2010-2016. However, The FICC division experienced a significant decline with a CAGR of -5.5%.  This is attributed to increased regulation and the associated deleveraging of the ecosystem combined with increasing technological forces.

Short-Term and Long-Term Projection of Digital Assets Under Management up to 2030

Autonomous Research has estimated the growth of Digital Assets under Management in the short-term and long-term respectively. The short-term base case projection estimates $1.5 trillion in digital AUM by 2020. This figure is driven by our expectation of an increased adoption of Roboadvisors as a result of fiduciary requirements shrinking transactional businesses. In the case of a delayed adoption, our conservative projection estimates $0.5 trillion in digital AUM by 2020.

In the longer term, our base case projection reaches $4 trillion in digital AUM by 2030. However, with growth and ETF-like adoption, where Roboadvisors use passive ETFS to shrink industry fees, we estimate $8 trillion in AUM.  Finally, our Bull case occurs with digital wealth growing into HNW with early adoption across orphan accounts and the high-end mass affluent. This would lead to $17 trillion in digital AUM by 2030.

2030 Projection of Blockchain Technology Market

Our findings project that Blockchain technology companies could experience a revenue pool of $6 billion by 2020 and $20 billion by 2030. These figures are based on the impact of digital ledger technology on payments: (1) Business Cross Border, (2) Remittance, as well as impact on (3) Capital Markets and (4) Title Insurance. Findings show that Cross Border B2B will make up most of the Blockchain revenue pool at $3.5 billion (56%) in 2020 and $12.2 billion (60%) in 2030. We also expect the increasing adoption of digital currency to put downward pressure on remittance payments shifting 20% of revenue to Blockchain companies. We project this to account for $1.5 billion (24%) of Blockchain revenue in 2020 and $3.8 billion (19%) in 2030. Remaining revenue is captured by the reduction of infrastructure and counterparty risk for capital markets, as well as savings in Title Insurance commissions and maintenance cost. In the period 2020-2030, Autonomous Research estimates a CAGR of 12.6% for the Blockchain technology market.

Title Insurance Market Estimation

fp5.png

Autonomous Research has estimated the Title Insurance industry at $13 billion in the US alone. Title insurance covers the loss of ownership interest of a property from defects in title to real property and is a necessity if a property is mortgaged. We found a notable dip in revenues following the financial crisis, with revenues dropping from $14.2 to $10 billion from 2007 to 2008. Growth rate following the crisis has been sluggish, rising only from its lowest revenue of $9.4 billion in 2009 to the $13 billion in 2015.

The overall market revenue is defined by the following segments: (1) revenues gained directly and (2) revenues gained through agents. Findings show that the revenues were predominately gained through agents, who contributed to 60% of all revenues.

Global Payments Market and Breakdown by Revenue Pool

Autonomous Research has estimated the size of the global payments market at $1.8 trillion in 2015. This figure is derived from the sum of liquidity, domestic, business cross-border and remittance payments.  It can be seen that B2B cross border payments and consumer remittance constitute for 16% of the $ 1.8 trillion total in 2015. Net interest and domestic payments make up the vast majority of payments and have been growing steadily over recent years.

On the right hand side the chart depicts the breakdown of consumer remittance and business cross border payments for 2015. Consumer remittance is defined as electronic transfers from a foreign worker to an individual in their home country, and is mostly present in North America with 54% of all payments. The remaining remittance payments occur in APAC and EMEA with 28% and 25% respectively. Alternatively, payments for business cross border are largely in Asia and the pacific, which constitutes for 45% of all payments. It can be seen that Latin America does not have a share in the $28 billion consumer remittance payments in 2015, yet it does make up 9% of all business cross border payments.

Impact of Roboadvisors and Blockchain on Revenue Pools by Industry

Autonomous Research estimates that the Blockchain and Roboadvice technologies will impact over $900 billion in revenue, reducing it by approximately $250 billion. The revenue pool from 2016 is derived from revenues in: (1) business cross border payments, (2) investment management, (4) remittance payments, (5) capital markets and (6) title insurance. It is estimated that the impact of Fintech will consist of reductions of $44 billion from Roboadvice and $204 billion from Blockchain in the form of digital ledgers.  All areas of the revenue pool will be reduced as a result of these technologies, with the exception of capital markets as their revenues rise from $212 to $234 billion.

On the second chart, we looked at the specific impact each technology will have on the respective industry. It shows that Roboadvice will solely affect inventory management as it reduces the industries revenues by $ 44 billion. Alternatively, distributed ledgers will lead to reductions in B2B Cross Border, remittance payments and title insurance. The reasoning for these reductions can be associated with the concept that the digitization of finance is typically a revenue-contracting development. Despite this, it can be noted that capital markets received an increase in revenue from Distributed Ledgers due to the fact that in secularly shrinking markets we equate cost-savings with expansion.

Addressable Market Analysis for Consumer and Small Business Loans

Autonomous Research estimates the opportunity for digital lenders in the US alone to be at US$1 trillion, excluding mortgages. At present there are $4 trillion in outstanding consumer loans in the US, although not all of this is available to digital lenders and we estimate instead that there is addressable consumer opportunity of $500 billion. This amount consists of $200-$300 billion for student loans, which have been mispriced by the federal government, allowing borrowers to potentially qualify for a lower rate. Auto loans will contribute $100 billion in prime and near-prime from non-banks. There is an additional $150 billion in personal finance in non-subprime credit card balances over $10,000, where the borrower has cash flow to move to a three or five year amortizing loan.

Small businesses are a further opportunity for digital lenders, with $310 billion in sub-$1 million loans to small businesses and an additional $100 billion in demand.  This unmet demand is sourced from estimates by the US Federal Reserve Bank of NY, who claim there is an unmet credit demand resulting from banks unwillingness to make smaller loans.  

UK Motor Insurance Premium & Profit Profile

Autonomous Research has projected the UK motor insurance premium and profit profile in the period 2015-2060. Our estimates indicate that premiums will see an annual 1.5% rise leading up to 2025 with the current 20% return on capital (ROC) shrinking to a more sustainable 10%. This is reflected by the sharper fall in profits in the period 2015-2025. In our view, 2025 will be the pivotal point for motor insurers as self-driving cars take hold and premiums fall by nearly two-thirds by 2060. Unsurprisingly, profits are also expected to fall in this period; however we do not assume a slash in profitability with ROC remaining roughly constant at 10%.

New Vehicle Sales Forecast From 2005 To 2025

Autonomous Research estimates that nearly two-thirds of new car sales will take place in emerging markets (EM) by 2025. Our forecast shows new vehicle sales in (1) Developed markets, (2) EM (China/India), and (3) EM (Other).  The rise of the car-sharing economy (among other factors) in developed markets has resulted in shrinking vehicle sales from 44 million in 2005 to a projected 39 million in 2025. Meanwhile, lower purchase prices and falling operating costs are pushing vehicle sales in emerging markets, from a combined 22 million in 2005 to a projected 68 million in 2025. This growth will be particularly visible in China and India where the rise in sales is estimated from 7 million in 2005 to 41 million in 2025.