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As Trump's electoral victory became clear, global markets plunged into volatility.

Dow Jones stock futures dropped by 3.8% in premarket trading, S&P futures by 3% overnight, and Nasdaq futures by almost 5%. All major European indices dropped by 2%, on average. The price of bitcoin, however, surged around 4% to reach highs of $738.33 overnight. The cryptocurrency saw similar gains in June after the Brexit vote, suggesting that investors are increasingly turning to bitcoin in times of political and economic uncertainty. 

There are a number of reasons why bitcoin proves attractive in these circumstances: 

• It's an alternative asset. Alternative assets are non-traditional assets — other examples include precious metals and art. They typically do not move in the same direction as the stock market and therefore are popular with investors looking to diversify their portfolios. 
• It is a decentralized currency. This means it isn't affected by any one country's economic changes or policies. In turn, this can make it particularly attractive in periods of political turmoil when policies affecting national currencies, like interest rates, for example, may be subject to rapid and unexpected change. 

We will likely see bitcoin make further gains in the near future as political uncertainty grows across Europe. Populist victories such as Trump's, in which candidates who position themselves as political outsiders gain power, create a climate of uncertainty that makes bitcoin more attractive. 

Populist, protectionist candidates are gaining popularity in the runup to elections in France and Austria, and at the same time, the furor around Brexit is intensifying, meaning that market volatility will only increase going forward. This suggests a major potential opportunity for bitcoin to woo investors looking for less vulnerable investments.

Blockchain technology, which is best known for powering Bitcoin and other cryptocurrencies, is gaining steam among finance firms because of its potential to streamline processes and increase efficiency. The technology could cut costs by up to $20 billion annually by 2022, according to Santander.

That's because blockchain, which operates as a distributed ledger, has the ability to allow multiple parties to transfer and store sensitive information in a space that’s secure, permanent, anonymous, and easily accessible. That could simplify paper-heavy, expensive, or logistically complicated financial systems, like remittances and cross-border transfer, shareholder management and ownership exchange, and securities trading, to name a few. And outside of finance, governments and the music industry are investigating the technology’s potential to simplify record-keeping.

As a result, venture capital firms and financial institutions alike are pouring investment into finding, developing, and testing blockchain use cases. Over 50 major financial institutions are involved with collaborative blockchain startups, have begun researching the technology in-house, or have helped fund startups with products rooted in blockchain. 

Jaime Toplin, research associate for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on blockchain technology that explains how blockchain works, why it has the potential to provide a watershed moment for the financial industry, and the different ways it could be put into practice in the coming years.

Here are some key takeaways from the report:

• Spending on capital markets applications of blockchain is expected to grow at a 52% compound annual growth rate (CAGR) through 2019, according to Aite Group, to reach $400 million that year.
• Banks and major financial institutions are working both collaboratively and independently to develop blockchain tech. Over 50 major financial institutions are involved with collaborative blockchain startups, like R3 CEV or Chain. And many are investing in the technology on their own as well.
• Putting blockchain to use for real-world transactions is likely not that far off. If working groups' tests are successful, firms could be using it to transact real value as early as the end of this year and we could see widespread industry application within the next few years. 

In full, the report:

• Examines the funding increases that are pouring into blockchain
• Assesses why blockchain is becoming so popular and what factors are driving up increased research and development
• Explains in full how blockchain technology work and what assets make it valuable and vulnerable
• Identifies pain points in the financial industry and profiles how various firms are using blockchain to solve them
• Demonstrates the challenges to mainstream adoption and their potential solutions

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of blockchain technology.

Join the conversation about this story »

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This story was delivered to BI Intelligence "Payments Briefing" subscribers. To learn more and subscribe, please click here.

After Donald Trump unexpectedly clinched the US presidency early Wednesday, the uncertainty rippling through the world could extend to the payments industry in a few key ways.

A Trump presidency could limit one of US remittance firms’ largest drivers of business.

• Trump at one point threatened to cut off remittance send from the US to Mexico.Back in April, the Washington Post received a memo regarding Trump’s plans to fund his proposed 1,000-mile border wall between the US and Mexico. In the memo, Trump noted that he planned to force Mexico to pay for the wall by invoking the US Patriot Act to cut off portions of the flow of money between the US and Mexico until Mexico made a one-time $5 billion-$10 billion payment. That monetary flow would likely include remittances.
• That could drastically curtail the operations of US remittance firms. Mexico is the largest receive destination for US remittances, cashing $25 billion in 2015, according to the World Bank. The strength of that corridor is pushing firms to double down on Mexico — for instance, Western Union recently nearly doubled the size of its retail network in the country, and MoneyGram unveiled a product in partnership with Walmart to make it easier and less expensive to send money from the US to Mexico. Cutting off access to the corridor, even temporarily, could drastically change the trajectory for these companies. 

Trump's victory could also impact two key categories of transaction volume.

• Domestic spend: The election's results will likely bring about economic uncertainty to US markets, which could affect how businesses and consumers spend. An increase in economic uncertainty is often accompanied by a decrease in consumer confidence. This, in turn, may lead to businesses and citizens mitigating any risk of a potential economic downturn by implementing safeguards such as hiring freezes or holding more in savings rather than spending. A reduction in spending would likely have a negative impact on sales for all the major players in the payments ecosystem, including but not limited to credit card companies, payment gateways, retailers, and even banks. 
• Cross-border spend: Throughout his candidacy, Trump emphasized bringing manufacturing back to America, specifically taking aim at firms like Apple to build its products in the US rather than China. If Donald Trump pushes isolationist trade policies and issues tougher manufacturing restrictions, there could be a huge shift in how both consumers and businesses make international transactions. There would likely be a major decrease in international spending as more consumers are either unable to make transactions due to restrictions or unwilling to pay any extra fees. 

Regardless of how Trump's presidency unfolds, the payments ecosystem will continue to grow and change.

Evan Bakker and John Heggestuen, senior analysts at BI Intelligence, have compiled a detailed report on the payments ecosystem that drills into the industry to explain how a broad range of transactions are processed, including prepaid and store cards, as well as revealing which types of companies are in the best and worst position to capitalize on the latest industry trends.

Here are some key takeaways from the report:

• 2016 will be a watershed year for the payments industry. Payments companies are improving security, expanding their mobile offerings, and building commerce capabilities that will give consumers a more compelling reason to make purchases using digital devices.
• Payments is an extremely complex industry. To understand the next big digital opportunity lies, it's critical to understand how the traditional credit- and debit-processing chain works and what roles acquirers, processors, issuing banks, card networks, independent sales organizations, gateways, and software and hardware providers play.
• Alternative technologies could disrupt the processing ecosystem. Devices ranging from refrigerators to smartwatches now feature payment capabilities, which will spur changes in consumer payment behaviors. Likewise, blockchain technology, the protocol that underlies Bitcoin, could one day change how consumer card payments are verified.

In full, the report:

• Uncovers the key themes and trends affecting the payments industry in 2016 and beyond.
• Gives a detailed description of the stakeholders involved in a payment transaction, along with hardware and software providers.
• Offers diagrams and infographics explaining how card transactions are processed and which players are involved in each step.
• Provides charts on our latest forecasts, key company growth, survey results, and more.
• Analyzes the alternative technologies, including blockchain, which could further disrupt the ecosystem.

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the payments ecosystem.

Join the conversation about this story »

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