We aspire to be the leading trusted advisor and financier to our clients, which include corporations, financial institutions, financial sponsors, governments and public authorities and boards of directors and special committees. The Investment Banking Division is at the front end of Aura’ client franchise.
Resilience through a downturn
All good things must end—and someday, perhaps soon, the 10-year-old US economic expansion may run out of steam. Next month, it will become the longest boom in US history. Executives are well aware that the party might end. But not many have paused to consider what happens after the economy tips into recession. How bad will it be? And how can companies prepare for and manage a downturn?
Our colleagues have explored these questions for the macroeconomy, and we have done the same for a much narrower slice that is at particular risk: the US banking industry. Depending on the scenario that triggers the recession (for example, a slowdown in China, perhaps triggered by a trade war), a moderate or severe recession might result. Our research suggests that industry-wide losses might range from $117 billion in a moderate downturn to $435 billion in a severe recession.
Consider what might happen in commercial real estate (CRE), one of the industry’s biggest exposures. Across the six scenarios we modeled, including the Federal Reserve’s CCAR tests and multiple commercially available outlooks, banking industry losses might range from $27 billion to as much as $58 billion. CRE has mushroomed in recent years; total CRE lending (by banks, insurers, and others) is the highest it’s ever been, at about $2.2 trillion, up from $1.6 trillion just before the global financial crisis. Banks account for about $1.3 trillion of all CRE lending. Their CRE loan books have expanded by 2.4 percent annually since 2010 and have grown about 30 percent in the past decade. Meantime the rates of charge-offs and loans transitioning into delinquency are moving into historically low territory.
Success can breed complacency, of course, and the worry is that lenders will not pause until it is too late, creating significant impairments for individual institutions. Of particular concern are smaller banks (those with less than $10 billion in assets) and regional banks (up to $100 billion). Small banks’ CRE assets grew by 26 percent from 2008 to 2017; regional banks’ CRE holdings grew by 52 percent. This rapid expansion has lifted the CRE portion of small banks’ total assets from 20 percent to 25.3 percent; at regional banks, the CRE book now accounts for 18 percent of the total, up from 12 percent in 2008.
Similarly, some regions seem already to be nearing a peak, creating the potential for greater exposure for lenders. Multifamily prices in San Francisco grew only 1.9 percent in 2017, much slower than the 8 percent annual uptick that the city has enjoyed since 2000. A similar slowdown took place in New York City: 5.9 percent price growth in 2017, compared with 10.7 percent annual growth since 2000. As banks keep lending into the shifting environment, the newest loans with the longest maturity will be most at risk.
Corporate and industrial lending (C&I) is another asset class we’re watching closely. Loan balances have grown 4.1 percent annually since 2008, to $2.3 trillion today. That’s about 80 percent higher than the pre-crisis peak. Depending on scenario, and on lenders’ portfolios, banks could see significant losses, with sectors such as retail and oil and gas firmly in the crosshairs. Total losses in this asset class, which we estimate could range from about $15 billion to about $85 billion, would be second only to credit cards. In fact, because of the strong growth in lending books, losses in even a moderate recession would reach levels similar to the global financial crisis.
Even if a bank has managed its CRE and C&I exposures well, or its balance sheet consists mainly of other assets, it is still at risk. Our research also explores the dynamics of contagion risk. In downturns, correlations between asset classes approach 100 percent, and unexpected links can emerge. No one knows, for example, how the vast and growing stock of student debt will behave in a crisis, and whether defaults here will lead to defaults in other asset classes.
In our forthcoming paper, we explore the dynamics of each asset class under a variety of scenarios and offer ideas for banks on how to prepare. The short version? Banks must get better at using new analytical tools to anticipate trouble; strengthen the balance sheet through both big portfolio moves and tactical changes; and preserve income through greater efficiency. When losses start to appear, banks need to mitigate them through better underwriting, a reinvigorated collections approach, and smart hedging. Throughout it all, they need a leadership mindset to gain advantage over competitors. No one comes through a recession unscathed, but history teaches us that the best banks dramatically outperform the worst and set themselves up for greater success when the cycle turns again.
How We Are Organized
Our global structure allows us to better serve the strategic and financing needs of our clients across all geographies and industries. IBD encompasses two areas: IBD Classic and our Financing group. This dual structure enables us to offer the broadest range of products and advisory services, furthering our ability to deliver best-in-class solutions to our clients.
Mergers and Acquisitions
Our firm is a longstanding market leader in M&A advice, including sell-side advice, raid and activism defenses, cross-border M&A, special committee assignments and complicated merger transactions. Our clients are located across the globe and include businesses, private investors, government agencies, private individuals and families. We provide advice on a full range of transactions, including mergers, sales, acquisitions, leveraged buyouts, joint ventures, raid defenses, spin-offs, divestitures and other restructurings.
The Corporate Derivatives team works with corporations to develop customized risk management strategies.
Corporate Finance Solutions
The Corporate Finance Solutions team helps businesses structure complex transactions.
Equity Capital Markets
The Equity Capital Markets team works closely with public and private companies, governments and financial sponsors to originate, structure and execute equity and equity-linked financings such as initial public offerings, follow on offerings, convertibles and derivatives.
Investment Grade Capital Markets
The Investment Grade Capital Markets team provides guidance on capital structure across debt, hybrid, derivative and equity-linked products for organizations with high credit-quality ratings. The team’s syndicate desk is responsible for marketing, pricing and distributing new corporate bond, hybrid and preferred stock US-dollar issues for companies around the world.
Latin America Financing Group
The Latin America Financing Group consists of professionals situated in regional offices across Latin America as well as our Washington headquarters. The team is responsible for covering sovereigns, financial institutions and a broad range of corporate clients. Transactions the team are involved in vary from leveraged loans and structured finance, including straight capital markets debt issuance, to equity and equity linked issuance. The diversity of clients and products we cover creates a highly entrepreneurial and creative environment.
Leveraged Finance Markets
The Leveraged Finance Capital Markets team originates, structures and executes bank loans and high yield bond financings for corporate clients and financial sponsors. Some transactions include leveraged buyouts, refinancings and restructurings. The team’s syndicate desk is responsible for underwriting and syndicating bank loans and high yield bonds.
The professionals in the group develop quantitative and technical solutions for IBD’s clients in partnership with teams throughout the Financing Group, IBD Classic, and the Securities Division.
The Liability Management team advises on and executes public and private debt transactions including tenders, exchange offers, and consents. These transactions are often executed as part of broader corporate restructurings, asset sales and refinancings.
The Structured Finance team helps clients securitize assets, businesses and risks associated with acquisition financing and balance sheet management. The team’s product suite includes catastrophe bonds, film, entertainment and aircraft financing, and the securitization of franchise royalties, intellectual property, infrastructure, auto loans, student loans, and life insurance.
Reimagining transaction banking with B2B APIs
In a globalized economy, organizations need to manage diverse pools of liquidity, fund cross-border trade, optimize working capital, and keep a close eye on risk. Banks traditionally support these priorities through a range of global transaction banking (GTB) services. However, amid rising competition from niche fintechs and digital banks, the market share of many incumbents is under threat. To respond, banks can use B2B application programming interfaces (APIs) to move closer in the value chain to their clients. These connective technologies offer clients easier access to GTB services from their own platforms and enable seamless interaction with third parties.
Leading banks are focusing GTB integration efforts on products that promise most growth. According to a Aura survey, executives expect cash management and trade finance to be the growth engines over the next three years (Exhibit 1).1 This in the context of a business that already generates global annual revenues of $1 trillion.
As executives consider how to make the most of growth opportunities, four major regulatory and technology trends are reshaping the GTB landscape:
Open banking directives are leading to a more fluid and innovative systems landscape
Digital channels with smart personalization are replacing off-the-shelf applications
Advanced analytics are improving liquidity forecasting
Blockchain and distributed ledger technologies are supporting the digitization of supply-chain finance
API platforms enable a flexible and iterative response to these trends. However, many banks have not invested sufficiently, and thus risk losing out to better-integrated competitors that can respond faster and more flexibly to client needs. The bottom line? Effective integration through B2B APIs should be a GTB priority.
B2B integration: The state of play
Traditionally, many banks have relied on technologies such as host-to-host file transfer, based on legacy web services, or secure file transfer protocol (SFTP), to integrate their GTB services with their clients’ systems. These solutions are predominantly used for cash management services such as payments, transfers, and cash pooling. However, while they tend to work well for single-step transactions, they struggle when transactions require conditional routing. This prevents them from being used for integration of more complex products.
We see six major challenges around file-based integration:
limited exception handling on format mismatches
manual failure recovery following network or system outages
weak controls for file tampering and man-in-the-middle breaches
long customer onboarding times—as much as four to six months
bulky file formats for enterprise resource planning (ERP) integration, requiring customization for each corporate
higher operating cost to run and maintain the specialized software needed
Enter B2B APIs
B2B API platforms help banks make GTB services available to their clients and partners as discrete operations. They typically work in a closed network, helping embed GTB functionalities seamlessly and securely into client workflows. In one example, a leading Indian bank integrated its B2B payments APIs with an online delivery startup, enabling real-time settlement and instant salary payments. Similarly, many companies are leveraging cash management APIs to automate invoice reconciliation workflows in their ERP systems.
Emergence of open standards such Europe’s PSD2 and public goods infrastructure including India’s Unified Payments Interface are also driving adoption. Given the potential upsides, it is not surprising that over 85 percent of respondents to our executive survey say they plan to invest in cash management APIs in the next three years and close to 50 percent plan to expand trade finance APIs as part of their digital innovation agendas (Exhibit 2).
Building a B2B API platform: Five success factors
A common challenge in building an API banking platform is balancing corporate requirements on process flow and flexibility with internal security and operational risk controls. A well-designed B2B API platform will address these competing priorities and create a culture of co-ownership with clients and partners, thereby spreading the cost of innovation and reducing time to market. Leading GTB players that have made the most progress tend to leverage five success factors:
1. Embrace a product development mindset
APIs should be seen as products with their own lifecycles and requiring the same commitment to development, testing, and marketing as any other innovation. With that in mind, there are two critical elements:
Design for process control and orchestration: Banks should design process APIs to enable end-to-end workflows in activities such as domestic payments, import letters of credit advisory, and forex rate booking. IT teams should plan to create 40 to 50 build-to-stock APIs, ensuring that clients are able to orchestrate them in their ERP systems, perform necessary validations, and manage exceptions.
Weigh tradeoffs between a channel and product approach: Building transaction banking APIs as new product offerings would require teams to individually develop workflows and data structures, before plugging them in to existing systems. Banks can avoid costly repetition by building APIs as channels to existing products (internet banking, trade finance systems) and therefore leveraging account mapping, business logic, and security controls that already exist in their systems.
2. Set up a modern API lifecycle management platform
Banks can choose a cloud-based or on-premise solution that is open-source or part of an enterprise suite, while ensuring they offer the following key capabilities:
API gateway for API exposure, access control, rate limiting, security enforcement, and orchestration
API publisher for policy and version management, SLA performance management, and environment access (sandbox, UAT, and production)
API store and development portal for API discovery, developer onboarding and management, API documentation, reporting, and key management
API analytics for operational metrics, business metrics, billing, and metering
Individual application owners working on downstream systems can continue to own underlying business logic, error handing, logging, and enhancement. However, service contracts should be rewritten to make them RESTful2 and decomposed into microservices for easier maintenance and upgrades.
3. Extend risk management and operational controls to API-based offerings
Executives should extend risk and operational controls to API-based solutions, ensuring that the bank continues to meet its regulatory compliance obligations.
Align security and regulatory controls: B2B API services must conform to security and regulatory requirements by ensuring compliance with existing confidentiality, integrity, and availability models. These can be implemented with a combination of IP whitelisting, client ID and secret keys, digital signatures, and hashed payloads. One global bank chose to implement API security using a hardware security module (HSM) for dynamic key management in its collections API suite.
Amend client undertakings and legal contracts: Contracts with corporate clients may not incorporate the necessary terms for API-based integration. Banks therefore may need to draft new terms to facilitate system-to-system interactions and straight through processing (STP), and to define transaction limits. One Asian bank created an STP authorization form as an addendum to existing contracts to enable the API channel for its clients.
4. Leverage partnerships and self-service solutions for customer acquisition
By building out their ecosystems, banks can unlock innovation opportunities, expand their networks, and acquire new customers.
Form partnerships with software-as-a-service finance companies: GTBs can unlock new customer segments by providing downstream banking services to customers of cloud ERP providers and fintechs. An Asian bank was successful in onboarding new SME customers by partnering with a cloud CRM solution provider to offer back-end banking services for vendor payments and customer refunds.
Simplify customer onboarding: Banks that create marketplace offerings and design self-service onboarding flows can enable corporate client users with the appropriate authorizations to register their corporates to B2B API services. Several banks have set up API stores that provide test-and-learn platforms for customers to try out APIs and interact with API owners before incorporating them into their systems.
5. Define an API taxonomy to accurately assess system readiness, avoid proliferation of
incompatible APIs, and prioritize for business value
An API taxonomy can help banks define ownership and governance rules. Banks should choose a taxonomy based on their own platform design. One common approach is to layer definitions as follows:
Experience APIs are designed for a specific user experience and enable all data consumption from a common data source.
Process APIs help manage workflows within a single system or across systems by simplifying the underlying implementation complexities of different source systems.
System APIs control CRUD (create, read, update and delete) operations that provide access to core system data, insulate users from the complexities of underlying systems, and enable reuse of data across multiple projects.
Experience APIs should be owned by channel teams and process APIs by business owners. System APIs should be controlled by application owners. Another approach, used by one European bank, is to create a prioritization framework based on important use cases, in this case using umbrellas such as regulatory APIs, build-to-stock APIs, and third-party APIs. The bank found that the approach helped drive internal innovation and monetize its APIs externally.
Successful GTB fintechs have achieved unicorn status (that is, valuations in excess of $1 billion) by providing best-in-class services coupled with a full suite of API functionalities, and integrating these into client systems. Forward-looking global banks, meanwhile, are investing their GTB IT budgets in technology enhancements, including API platforms. Banks that have not yet taken steps must therefore act urgently to enhance their own API propositions and partner with clients to ensure they keep pace and remain relevant in the fast-evolving landscape.
The future of private banking in Europe: Preparing for accelerated change
European private banks were already feeling pressure to revitalize. Now that the pandemic has accelerated changes in the expectations of clients and employees, the industry will need to accelerate its transformation.
Aura’s European Wealth and Asset Management Practice published its latest report on the future of European private banking. In the report, Preparing for accelerated change, we looked at how the impact of the COVID-19 pandemic has accelerated changes in the expectations of clients and employees, and at what the private banking industry can do to accelerate its own transformation. In this short video, authors Sid Azad, Cristina Catania, and Christian Zahn discuss the report’s findings, how COVID-19 has affected the industry, and prospects for the future.
Building a successful payments system
A look at what it takes to create a retail payments offering with staying power.
Serves payments, banking, and financial services clients, as well as retailers and fintechs, on issuing, infrastructure, and acquiring topics
Advises clients across the payments value chain, from transaction banks and central banks to digital attackers, payments processors, and merchants
The past two decades have seen enormous growth in payments systems. Twenty years ago, contactless cards, mobile payments, and digital wallets were in their infancy. Today, they are ubiquitous. But as new payments systems continue to emerge, only a few are likely to survive in the long run. Of more than 200 systems introduced between 1993 and 2000, for instance, only PayPal emerged as a standout success.
What does it take to create a retail payments offering with staying power? It’s a billion-dollar question with a fundamentally simple two-part answer: large-scale access to stores of value so that senders and receivers can exchange funds, plus a trusted operator that routes transactions between counterparties and enforces fair governance standards. However, the first of these requirements has historically made launching a new scheme difficult for all but incumbents that already manage checking accounts and credit lines. This competitive “moat” has been strengthened by network effects. Incumbents also benefit from the “last inch” problem in retail: how to enable a buyer to transfer their payments credentials to a merchant. Incumbents control physical point-of-sale (POS) devices, and extending them to other payments methods is a slow and costly process.
Yet the future may offer brighter prospects for new payments systems. A host of structural changes over the past few years may lead to many barriers to entry coming down:
Customers are congregating in ecosystems and marketplaces where they consume similar services and can be more easily accessed, like Amazon, Alibaba, and Uber
Technological advances are enabling companies to quickly scale up new products across critical masses of senders and recipients, creating large seed populations in digital marketplaces, social networks, and other groups
Application programming interfaces (APIs) are enabling payments to be easily integrated with other products via underlying bank rails such as automated clearing house (ACH) payments and wire transfers
Higher digital spending is allowing new “plug and play” solutions to be adopted without the need to roll out physical POS devices.
These changes have triggered a proliferation in new consumer-to-merchant payments networks and schemes over the past decade. New aspirants in developing countries—such as Alipay and WeChat in China, Paytm in India, and MercadoPago in Argentina—are leapfrogging physical card infrastructure. Tech companies are capitalizing on their consumer reach to establish intermediaries between card networks and consumers in the form of Apple Pay, Google Pay, Grabpay, and others. Card networks are diversifying their offerings via M&A, with Visa acquiring Earthport and Plaid and MasterCard acquiring Vocalink and Nets. Meanwhile, countries are quickly establishing new domestic standards of usage via ventures such as MobilePay in Denmark and Swish in Sweden.
Networks and schemes: What’s the difference?
As payments providers broaden their horizons, it is helpful to clarify terms: “network” and “scheme” are often used interchangeably, but strictly speaking, they refer to different things:
A network, at its simplest, is a directory of participants along with the information required to access their stores of value and settle transfers: names and addresses, account details, and so on. Primary networks, such as ACH and real-time gross settlement (RTGS), are integrated with bank systems and do not rely on any other settlement mechanisms to execute payments.
A scheme also has a directory of participants, but what differentiates it from a network is that it also enforces rules and standards. As well as connecting to bank networks to transfer funds, it ensures that participants abide by rules and standards on fraud liability, participant eligibility, data security, and other matters. Some “pure” schemes, such as the National Automated Clearing House Association (NACHA) in the US, focus only on managing their own rules and standards without maintaining a directory of participants. Examples of payments schemes include Visa, Mastercard, JCB, Amex, Girocard, China UnionPay, Zelle, and TransferWise.
Hybrid schemes typically connect to both schemes and networks. They often include a store of value (that is, some kind of deposit account) and overlay their own rules to create a common set of standards. Examples of hybrids include Alipay, WeChat Pay, PayPal, and Twint.
How to start a payments system in 2020
Building a new payments system is no longer the exclusive preserve of financial institutions. Companies with strong ecosystems can take advantage of them to set up networks and schemes with their customers, suppliers, or other third parties. Incumbents, meanwhile, are venturing into new territories. Card schemes have used acquisitions to expand into networks and schemes catering to business-to-business (B2B), cross-border, and POS lending, while banks have invested in domestic debit networks and digital payments. For entrants and incumbents alike, a new network or scheme can be scaled up by following the approach outlined below.
Identify an internal or external seed population with a critical mass of senders and receivers that generates strong network effects for its members. With an internal population, the company builds on a customer base or marketplace of its own that currently uses other schemes to send and receive payments. With an external population, the company partners or targets an external entity with a growing or under-served population, develops scheme standards, and then acquires customers. Companies with payments systems at this stage include the ride-sharing app Uber, the US restaurant-delivery services GrubHub and Caviar, and the US education, healthcare, and travel payments platform Flywire.
Collect payments information and enable internal payments. Since direct-to-account payments methods are typically cheaper than card schemes, collecting payments information is financially advantageous. It is also getting easier, thanks to innovations such as Plaid for accessing bank accounts and API-based open-banking standards. Providers can enable internal payments within a target population before extending the scheme to external users. Amazon, which collects bank-account information to enable direct ACH transactions, exemplifies this stage of a payments system.
Define pricing, rules, and standards. Graduating from a network to a scheme involves enforcing rules and standards for participants. (Swish, a mobile payments scheme in Sweden, has reached this stage in its evolution.) Branding is one key decision point: will the scheme have a different brand from the parent company? Will accepting merchants be required to communicate or display their acceptance? Another set of choices relates to open-data standards and access: what information is transmitted with each transaction? What data is retained, for how long, and who stores it? What data do participants and third parties have access to? Then there is pricing: what price is applied to transactions versus dollar flows? Does it vary by underlying payments type? Do cross-border transactions incur additional fees? Finally, fraud liability rules must be determined: if an unauthorized user gains access to a member’s credentials and conducts a fraudulent transaction, does that member have any recourse? If so, who is liable for that amount, under what conditions?
Create access channels and expand distribution. Opening up a payments system to participants beyond the seed population requires new access points for different purposes. One is onboarding: allowing new participants to join the network and collecting their payments information. Another is APIs access, to extend acceptance of the system via proprietary or third-party distribution channels. Yet another is dedicated marketing and sales, to expand the teams that drive acceptance. Finally, third-party channel access is needed to enable the system provider to work with regional acquirers to bundle a scheme as part of their merchant-acceptance packages. Payments systems that have reached this stage include PayPal, which offers payments via buttons embedded in e-commerce sites, and Alipay, which has expanded acceptance via its 2018 partnership with First Data (now Fiserv).
Is it worth it?
Successful payments systems have generated high returns in recent years (Exhibit 1). The returns of payments players (24 to 30 percent) have been multiples higher than fintechs, banks, and credit card issuers (-4 to 14 percent).
Throughout history, as payments evolved from barter to coins to notes to cards to digital wallets, the underlying revenue model for each method (whether merchant, interchange, or flat fees) has remained much the same. However, as digital payments methods, omnichannel, and instant payments converge to transform the payments industry, revenue models are likely to change, too. New networks and schemes will aggregate volumes and build ecosystems that generate network effects, enabling them to maintain premium pricing for customers while using low-cost bank rails to transfer funds. For instance, systems offering POS capabilities typically charge merchants 2.5 to 3 percent of transaction value, while paying considerably lower wholesale rates on the back end.
The outlook for incumbents
For payments providers of all kinds, the implications of these developments could be far-reaching. Levels of disruption are likely to vary for different players in the incumbent value chain.
Banks face a broad strategic question: should they manage their own payments networks or have third parties manage them—which could create strategic dependency? Banks in small to mid-size markets that lack the scale to justify investing in new payments networks could instead form regional agreements to aggregate scale and work with third parties to manage technology infrastructure, while retaining strategic and economic control of new schemes. Banks in larger markets with the scale to operate their own networks will need sufficient market share to create a coalition that sets standards for the new scheme, like the large US banks that created Zelle and opened it up to other banks.
In all markets, launching a new payments method calls for caution in pricing. If banks capture too much economic value, they could antagonize regulators and attract new entrants capable of underpricing them. Other options banks could consider include improving existing networks and connecting national debit schemes across regional markets.
Global schemes are continuing to explore new ways to capture volume, such as investing in linkages to bank accounts. Visa’s $5.3 billion acquisition of Plaid—a maker of APIs that allow companies to easily execute bank-account payments—is a striking example of the kind of expansive move that global schemes are increasingly pursuing. Meanwhile, Mastercard has made significant investments focused on B2B payments, as seen in its acquisition of Transfast, SessionM, as well as Nets’ account-to-account payments business.
Another option for global schemes is to establish co-acceptance partnerships. Examples include Visa’s partnership with Tencent to gain access to the WeChat Pay network in China and PayPal’s deal with Google Pay to increase POS acceptance.
Acquirers can differentiate themselves and add value for merchants by becoming a one-stop shop for an expanding array of payments schemes. Conversely, confining themselves to one or two schemes could put them at risk of disintermediation should these schemes decide to go directly to merchants. Acquirers can also offer merchants value-added services such as fraud analytics and merchant lending and help them upgrade their capabilities for additional schemes such as Alipay and WeChat Pay.
Opportunities for new entrants
Operators of new networks and schemes can create value for participants by increasing their reach, delivering a superior experience, and reducing their operating costs.
In terms of reach, tailoring a new network or scheme to meet the needs of its intended users through customized governance, rules, and pricing enables operators to maximize the pool of participants. When it comes to user experience, in the payments business, the experience often is the product. Consider the latest generation of POS devices or the introduction of Apple Pay and Google Debit. Years ago, the introduction of payments schemes like Paypal and Venmo enabled users to move money more easily via fewer steps than with previous systems. New networks and schemes can do the same by tightly integrating the payments experience into their own regional marketplaces and ecosystems.
Finally, new networks and schemes are free from the legacy infrastructure costs that large global networks bear. This, combined with purpose-built design, allows operators to pass on cost savings to participants. If those participants perceive real value in broader reach, better experience, and operating cost savings, operators can quickly monetize their offering. They can do this both directly, through transaction fees, lending, and pricing, and indirectly, through customer “stickiness” and increased brand reach and value.
Now may be the moment for incumbent providers to expand into new niches with specific needs, and for other ecosystems to control their destiny by building their own payments networks and schemes. Though incumbents will face threats, the growth of payments methods looks set to continue, presenting opportunities for incumbents and disruptors alike.