The Intangible Economy

An intangible asset is an asset that is not material, meaning it cannot be seen or touched, and it has no physical form. Despite this, they are very valuable resources. Their impact is broad, as they are found in everything: a designation of origin in food, an algorithm or software, or an industrial secret like the famous Coca-Cola recipe. Brand image, packaging, intellectual property, economic or contractual rights are also examples of intangible assets that add value.

What do gyms have to do with Uber?

If you're asked about one of the largest taxi companies worldwide, Uber will come to mind. But in reality, Uber doesn't own a single taxi, and it doesn't have employee drivers either. Uber is not an isolated case: if we analyze the balance sheets of big companies like Apple, Microsoft, LinkedIn... they have almost no tangible assets, they seem to be made of air!

One of the most physical businesses in the world, such as gyms, has joined the intangible revolution years ago: they offer activities like Zumba or BodyPump, which are trademarked routines from another company that designs the exercises, owns the copyright to the music, trains the instructors... etc., charging a license for it.

A world with endless opportunities

Intangible assets are more scalable but their costs are more prone to sink and create spillovers than tangible assets. They offer numerous opportunities due to their capacity for generating integration strategies or synergies.

These synergies can be simple, like the copyright of a song with a brand that uses it for advertising, or the designs of a clothing collection with the brand that sells it.

In the case of Uber, something more complex, it manages a value chain from the intangible: the software, driver participation, corporate capital, and customer data. Software like theirs can be used simultaneously in different places with the same effectiveness, so their scalability and opportunities are enormous. And let's not even think about the data they collect and all that could be done with it: its value is very high!

FinTech also operates in the intangible economy, so Inversa is a good example. Inversa's software is an intangible asset that continues to be developed and improved, as well as the know-how of our back-office colleagues, which increases the asset's value. Regarding its scalability and opportunities, we could sell it or apply it to another company with a different brand, work in different countries... etc., as well as develop synergies with a company that offers services that add value to us.

As you know, there are different types of FinTech, as we explained in a previous article. One of the segments in which they can be grouped is electronic money, an intangible asset that raises a variety of opinions and positions, depending on the point of view from which it is seen. Let's make a small reflection with both arguments to understand its complexity.

Is the elimination of cash beneficial?

Electronic money has been winning the battle against cash for years, which is progressively reducing its use year after year.

In 2011 Spanish telephone companies unified their standards to create NFC, which allows payments via mobile phones. In 2016 card payments surpass cash withdrawals from ATMs and in 2020, 22% of Spaniards stop using cash. The pandemic has accelerated this trend due to fear of contagion, but the elimination of cash is not as easy as it seems.

The central bank would be in charge of monetary policy, which can be seen as positive if one is in favor of interventionism, but negative if one does not trust the system or if, for example, they penalize saving with negative interest rates. This is just the first point of disagreement. There are plenty of arguments for and against, which can be summarized as follows:

Arguments in favor:

• Elimination of the risk of contagion between banks and countries in the event of banking or financial crises. Also, bank panic disappears since massive cash withdrawals cannot be made, only changing deposits from one entity to another.
• Control of capital flight. (Debatable in the case of tax havens with opaque financial entities).
• The management, production, and maintenance costs of cash would disappear: zero environmental impact.
• More effective redistribution of wealth by taxing the underground economy, as it would disappear with digitization.
• Increased productivity of many SMEs by streamlining the payment process.

Arguments against:

• Technology is not sufficiently developed to support it.
• Certain groups benefit from keeping cash as it is difficult to trace, so it will not be easy to eliminate.
• It would consolidate the banking monopoly over money, and the power of the economy will be in the hands of central banks.
• Intrusion into privacy and freedom in domestic economies.
• Increased social and economic inequality: unbanked citizens would be financially excluded.

What is clear is that to continue advancing and implementing the facilities offered by new technologies in our daily lives, it is necessary to implement regulation that meets the needs of society, which is not easy at all. What does the future hold for us?