Technology versus virus
19 June 2020
With the coronavirus pandemic precipitating mandatory lockdowns, economies, governments and societies have pivoted towards technology to continue to function. Some technologies have changed lives dramatically and will have a lasting impact beyond Covid-19, but not for everybody. flow’s Janet Du Chenne examines the infrastructure gap and how current technology trends could be managed to support a sustainable and inclusive recovery
On a Monday morning in June 2020, a professional worker sits at home in front of her laptop, waiting for a virtual meeting to start. A few seconds later her screen is filled by 20 familiar faces, who have also joined the weekly online catch-up. Elsewhere, millions of others are doing likewise. This scene, which just a year earlier could easily have featured in a sci-fi film, is in fact the reality of life in lockdown where companies are using virtual platforms to communicate.
Remote working technologies
Platform usage for face-to-face meetings has rapidly increased since lockdown began. Zoom reports 265,400 firms with more than 10 staff are now using its video conference platform, a rise of 354% for the first quarter of 2020 year on year1. The impact of these work-from-home (WFH) enabling technologies, including virtual private networks (VPNs) and voice over internet protocols (VoIPs), is also cited by the World Economic Forum (WEF) as one of the top 10 technology trends that are getting societies through Covid-19 and will have a lasting effect post-recovery2.
The wide acceptance of remote working using these technologies means that for many employees, WFH could become normal way of life as recovery takes shape. At least on a part-time basis, it is likely to become permanent, with video and audio conferencing possibly replacing the majority of face-to-face meetings, notes the Deutsche Bank Research Team’s latest issue of konzept magazine: Life after Covid-19 3 .
The Deutsche Bank Data Innovation Group (dbDIG) research is based on in-depth, high-frequency macro consumer surveys in eight major economies. Its findings suggest that while one in three of its respondents are now WFH in China, South Korea, France, Germany, Italy, Spain, and the UK, more than one-third of those surveyed would like to be able to do so, at least on an occasional basis, even after an end of the outbreak. Most, however, believe that their employer will not be receptive to this option. “If the latter turns out to be false, we could see a normalisation of WFH that could not only reduce costs but also address inclusive agendas going forward,” predicts Deutsche Bank’s Chief Asia Economist Juliana Lee. “To do this, technological constraints still need to be addressed: half of households report they cannot currently effectively work from home”.
“Technological constraints still need to be addressed: half of households report they cannot currently effectively work from home”
Remote work imposes other challenges4 to employers and employees (see Figure 1). Authors of WEF’s ‘top 10 technology trends to watch‘ article, Yan Xiao, Project Lead, Digital Trade and Ziyang Fan, Head of Digital Trade note that information security, privacy and timely tech support and loneliness can all be big issues to consider. They suggest that laws and regulations must be updated to accommodate remote work – and further psychological studies need to be conducted to understand the effect of remote work on people.
Figure 1: Remote working challenges
Despite the challenges of WHF, a dbDIG June 2020 survey covering 450 market professionals around the world found that people are more comfortable with doing so than they were in April and May. 65% (vs 57% and 39% last two months) think they’ll do 1-3 days per week WFH in a post-Covid world (see Figure 2). Those thinking they’ll only do it when they need to has dropped to 25% from 31% and 47% over the last two months. Highlighting that comfort level, this was the first month that “only when needed” was not the most popular choice.
Figure 2: How many times a week do different age groups think they will work from home?
Source: dbDIG Survey, Deutsche Bank Research
Expanding mobile broadband
The technologies enabling remote working rely on a stable, high speed and affordable internet. With a theoretical top speed of 10Gb (per second), which is 100 times faster than the top 4G speed of 100Mb5, 5G mobile broadband is expected to play a significant role in the permanence of a digital-based life.
However, notes WEF’s Xiao and Fan, 5G’s roll out is delayed in Europe at a time when the technology may be needed most in remote monitoring and healthcare consultation. The Chinese domestic market is the least exposed to a delay in 5G rollouts as its peak virus period has apparently passed and there is strong government support to resume 5G builds as a sign of national strength. In Europe, the adoption of 5G will increase the cost of compatible devices66 and the cost of data plans7. Addressing these issues to ensure inclusive access to the internet will continue to be a challenge as the 5G network expands globally, assert Xiao and Fan.
The GSMA Association, aka GSMA, which represents mobile network operators, also anticipates a slowdown in consumer 5G adoption in the short term as a more likely consequence of Covid-19; this is due to the impact on discretionary income and potential slowing of new handset launches, including a would-be 5G iPhone8.
In its latest mobile trend report, GMSA reports that in 2019, 4G became the dominant mobile technology across the world with over four billion connections, accounting for 52% of total connections (excluding licensed cellular IoT). 4G connections will continue to grow for the next few years, peaking at just under 60% of global connections by 2023. Meanwhile, 5G is gaining pace (see Figure 3): it is now live in 24 markets; numerous 5G smartphones have been launched; and 5G awareness and the intention to upgrade among consumers are both on the rise. By 2025, 5G will account for 20% of global connections, with take-up particularly strong across developed Asia, North America and Europe9.
Figure 3: 4G dominates, but 5G to play a bigger role in 2020
It noted that growth is still there but it is becoming harder to see. By the end of 2019, 5.2 billion people subscribed to mobile services, accounting for 67% of the global population. Adding new subscribers is increasingly difficult as markets become saturated and the economics of reaching rural populations become more difficult to justify in a challenging financial climate for mobile operators. Despite this, there will be around 600 million new subscribers by 2025 – mostly in India, China, Pakistan and Nigeria – for a total of 5.8 billion subscribers to mobile services (70% of the global population).
Figure 4: Milestones for the mobile industry
The benefits of mobile are reaching further than ever, says GSMA. The connectivity gap continues to close: almost 1 billion additional people have been covered by mobile broadband networks over the last five years. However, factors other than infrastructure are holding back the adoption of mobile internet, namely affordability, consumer readiness, and availability of locally relevant content and services. These barriers will slowly be overcome though, and by 2025 an additional 1.2 billion people will start using mobile internet for the first time, which will bring the total number of mobile internet subscribers globally to 5 billion (see Figure 5).
Click and deliver
Those fortunate to have a mobile phone have taken to buying more items online during lockdown since they cannot visit the stores. Some bars in Beijing have even continued to offer happy hour through online orders and delivery10. Penning her thoughts in konzept, Lee predicts this trend could also have a lasting impact on people’s changing technology habits, as governments formulate their strategies for kick-starting the economic recovery.
Just how long economic normalisation might take remains to be seen, but the DBDig Household Surveys provide an indicator of changes in household sentiment and spending habits. They point to a fragile state of mind among households and great caution in regard to returning to pre-Covid-19 behaviour. They also note important changes in household behaviour, which may prove permanent in some cases, especially if lockdowns persist for lengthy periods of time.
This is not surprising given that it takes on average 66 days for a new behaviour to become automatic, with simpler behavioural changes becoming permanent more quickly than complex ones11. Households are spending more on online purchases than previously, especially older and lower income households, which previously spent much less online, notes Lee. She also cites a Deutsche Bank food retail survey, reporting that about one-third of grocery shoppers in the US have made their first online purchases within the past two months, up from around 20% in early 2019. Acceptance of such services is growing: only a quarter of US households are uninterested in online grocery shopping, versus 40% before the Covid-19 lockdowns.
This paradigm shift is most notable in Asia, followed by the US, but is rather more limited in Europe where logistics infrastructure may be an issue. “The extent to which these behaviour shifts become permanent after the threat of Covid-19 recedes may also depend on the robustness of providers”, writes Lee. She points to delays in deliveries due to capacity constraints among logistics companies given the online shopping surge. The latter in turn has led to companies such as Amazon hiring more workers – about 30% more in the US – and reopening warehouses to non-essential items as it plans for sustainably higher demand. China has also seen a surge in online grocery purchases, as has South Korea, stretching its capacity.
Digital and contactless payments
For those who are doing more of their shopping online, Covid-19’s assault on cash tells how fears that banknotes and coins may carry the virus is accelerating the move towards cashless payments, for those who do not already use them. Contactless digital payments, either in the form of cards or e-wallets, are the recommended payment method to avoid the spread of Covid-19.
However, for the 1.7 billion of the un-banked12, who may not have easy access to digital payments, the lack of infrastructure to support this brave new world could impede progress. As Xiao and Fan point out, the availability of digital payments also relies on internet availability, devices and a network to convert cash into a digitalised format.
Telehealth and track and trace
Access to real-time, mobile data is proving valuable in tracking close contacts of coronavirus-infected persons and thereby helping to contain the spread of the pandemic. In China, although the Covid-19 outbreak has posed challenges to the daily operations of telecommunications, it has also accelerated the demand for digitisation. “Clearly, further digitalisation of services will require substantial investments in infrastructure. That comes as the EU has had to limit the streaming of high-definition video over mobile data networks to ensure they remain accessible by all subscribers” says Lee. Telehealth – the distribution of health-related services and information via technology – has also proved to be effective, with chatbots13 providing initial diagnoses based on symptoms identified by patients.
However, in countries where medical costs are high, it's important to ensure telehealth will be covered by insurance, assert Xiao and Fan. Telehealth also requires a certain level of tech literacy to operate, as well as a good internet connection. And as medical services are one of the most heavily regulated businesses, doctors typically can only provide medical care to patients who live in the same jurisdiction.
New technologies giving access to massive data sets are likely to play a part in the reopening of economies or the management of social distancing policies in a persistent pandemic scenario. Citing various country measures, Lee notes China, Singapore, South Korea and Taiwan have used geolocation, travel and financial data, among others, to track close contacts of infected people in an effort to contain the spread of the virus. China went further by using users’ past and current medical conditions to develop a Health QR Code which, depending on the score, either allows access to activities such a shops and public transportation stations, or orders people to self-quarantine.
Of course, privacy concerns may constrain the acceptance of these new technological applications. “About half of households we surveyed are unprepared to accept constant monitoring of their health by the authorities for the indefinite future,” notes Lee. Reflecting these concerns, Apple and Google have partnered on Covid-19 contact tracing technology, with user security central to their design. More initiatives are needed to address these concerns.
While track-and-trace apps help to contain the spread of Covid-19, there are those who lament the plans as the end of privacy with questions around how governments and companies will use and protect the data. This question about whether technology means the end of privacy is addressed by Luke Templeman, Macrostrategist in Deutsche Bank’s Research team, in konzept, who believes that most people will accept the trade-off, and see the health benefits as outweighing the costs to privacy.
Templeman notes an overwhelming net value in the benefits of this trade-off: security, prosperity and, now, health and despite the increase in this mass surveillance (both actual and potential) people feel freer than ever. “Indeed, one poll showed that four in five people globally feel they have more freedom now than at any time since at least 2006, before smartphones were released,” says Templeman. People feel freer, despite the loss of privacy, since they have been pulled out of poverty so “the trade-off of privacy for freedom and progress was a net benefit to many people’s lives.”
“The trade-off of privacy for freedom and progress was a net benefit to many people’s lives.”
Track-and-trace apps could thus become a normal part of life, as many will see them as a way for them to trade some privacy for the greater benefit of the freedom to live a longer, better quality life. But, cautions Templeman, there is a big difference in the trade-off today that is a very recent development – namely the online storage of data. “Barely a day goes by without a company somewhere being hacked, and the perpetrators can physically sit anywhere in the world,” he says.
Added to the concern of track-and-trace apps is the fear that it might accidentally create second-class citizens, leading the less-privileged with antibodies in their blood to self-infect in order to hopefully acquire some level of immunity before a larger wave of the disease hits their community.
Templeman adds: “Already during the Covid-19 outbreak there have been sad incidents of people suspected of having the disease being violently attacked. Should hackers release a database (either real or fake) with names of people during a future outbreak, there could be tragic consequences.”
In this mandatory situation, where a tracking system allows police to ask people why they are not obeying government rules, telecom or technology firms will become critical in ensuring public health. Templeman believes this scenario raises questions as to whether these firms should be regulated in ways that mirror the regulation of banks, whether they will be required to document extensive ‘know your client’ information, and whether they will be on the hook if they allow a criminal to buy a phone that is then used in connection with a crime.
Preparing for the coming tech-wall
In addition to their role in safeguarding people’s right to privacy, ensuring they can also access that technology at low cost should be the purview of policy makers and stakeholders globally to ensure nations remain competitive. The emergence of two emerging technology super powers - the US and China – could present a further challenge.
The impact of having both countries dominant post-Covid-19 is laid bare by Templeman who says that the race for supremacy is precipitating a Global Tech Cold War14. The fault lines have been drawn, he says, creating a Tech Wall which rapidly cuts the world into two halves with little technological interoperability and presents a difficult dichotomy for policy makers.
This Tech Cold War is reflected in the rising tide of nationalism that usually follows a crisis. According to a recent DBDig survey, 41% of Americans state they will not buy a “Made in China” product again and 35% of Chinese state they will not buy a “Made in USA” product again. “It is somewhat ironic that tech has been a major contributor to globalisation and this reversal might fuel the Tech Cold War even more,” says Templeman.
Using machine learning to track the number of Global Tech Cold War and proxy mentions in newswires globally over the past five years, the Deutsche Bank research team paired with DBDig to create the DB Tech Cold War Index (see Figure 6).
Figure 6: The Tech Cold War Index
Source: Deutsche Bank
American strategy appears to be to stymie China progress in areas of semiconductor capacity, telecom infrastructure, VC funding, high-end AI engineering talent, quantum computing capacity and tech R&D, to ensure that it is only between 2020 and 2025 that the East catches up, notes Templeman. The research team created a China versus US Geopolitical Tech Ratio using primary technology segments giving a higher waiting to semiconductors and AI talent. The ratio shows the yearly gap narrowing between the two, with China at 0.4 of US in Geopolitical Tech Capacity in 2015 and rising steadily to more than 0.6 by 2018 (see Figure 7).
Figure 7: China/US Tech geopolitical capital ratio
Source: Bloomberg, SEMI, NSB, Pitchbook, IFR, OECD, Deutsche Bank
Both sides will end up creating a Tech Wall, stresses Templeman. This will push neutral states to make a choice with the fault lines most painful in Europe, a continent where tech has not yet become a strong contributor to domestic innovation.
The Tech Wall would entail rival internet platforms, satellite communication networks, telecom infrastructure regimes, central processing unit architectures, operating systems, IOT networks and payment systems with very little inter-operability or interaction.
For corporates, it would mean having to deploy two different communication and networking standards across several geographies to ensure inter-operability. Product design would be much more challenging as they would no longer be able to design once and sell everywhere without incurring additional costs of complying with two different standards. Stricter regulatory controls would make data sharing across the Tech Wall and two different regimes of hardware an IT quagmire.
This could, in turn, impact the US$5trn ICT sector with the Tech Wall adding two-to-three per cent increase in capital expenditure and labour costs, notes Deutsche Bank research. At around US$250bn per year and increasing, this geo-political cost on the ICT sector and global growth would start to feel incredibly painful as time progresses.
“The impact this Wall could have on every sphere of life globally may last decades, if not generations,” warns Templeman. “It is something every policy maker, institution and corporate has to bear in mind as they plan for life post-Covid.”
The emphasis on a digital world post-Covid is prefaced on technology’s ability to keep the lights on. It has made life in lockdown possible and its acceleration means it will undoubtedly have an important to play going forward.
But what if another unexpected event occurs that necessitates something other than the digitisation on which recovery from the current crisis has been pegged? This could be an external electromagnetic shock, also known as space weather, which governments have identified as a developing threat14. The consequences include fluctuations in the Earth's magnetic field (geomagnetic storms), driving additional current into power grids, disrupting satellites, GPS (global positioning system) and radars.
As the UK Met Office puts it, "the potential effects of space weather are growing rapidly in proportion to our dependence on technology”. The impact of such an event occurring today would be huge; the US National Research Council estimated the current wider societal and economic costs of a severe geomagnetic storm to be around US$1−2trn.
Such geomagnetically induced currents (GICs) pose a threat to electricity distribution grids extending over long distances, which can cause blackouts and damage.
With GICs having the potential to take out the National Grid, digital’s role in recovering a system that relies on analogue technology will be rendered useless. Far-fetched as the likelihood of such an event occurring might sound, the current global pandemic was also caught many countries unawares.
So when determining how digital will influence life after Covid-19, other formats should not be discounted and may yet have a role to play. As the world enters into recovery perhaps the important question is not so much which technologies will help move to a digitised world, but rather what has the current pandemic taught us about preparing for the unexpected?
Summary of Deutsche Bank Research reports referenced
Konzept # 18: Life after covid-19 (13 May 2020), by The Deutsche Bank Research Team
The Deutsche Bank Research / dbDIG June 2020 survey results, by Jim Reid
Our new technology habits (page 67 of konzept # 18: Life after Covid-19, by Juliana Lee
The end of privacy? (page 73 konzept # 18: Life after Covid-19), by Luke Templeman
The coming Tech Wall and the Covid dilemma (page 30, konzept # 18: Life after Covid-19) by Luke Templeman
Deutsche Bank clients can access the full research reports here
If you would like access do contact a Deutsche Bank sales representative
1 See https://bit.ly/2BcRtWO at theverge.com
2 See https://bit.ly/3fvFt1s at weforum.org
3 See https://bit.ly/3ebtJRy at dbresearch.com
4 See https://bit.ly/2ANeXlk at businessinsider.com
5 See https://bit.ly/2AAyCVR at choose.co.uk
6 See https://bit.ly/30SmI43 at businessinsider.com
7 See https://nyti.ms/2Y9CqpN at nytimes.com
8 See GSMA report on Covid-19 impact: Testing the resiliency of mobile networks
9 See https://bit.ly/2YaXwV2 at gsma.com
10 See https://cnb.cx/3fuQujF at cnbc.com
11 See The British Journal of General Practice
12 See According to the World Bank, 1.7 billion of the population do not have a bank account
13 See https://cnb.cx/3dejt9M at cnbc.com
14 See https://bit.ly/2YIcAZc at dbresearch.com
15 See https://bit.ly/2YaEeyN at publications.parliament.uk
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