Societal Shifts Create Tailwinds for Certain Investment Categories

The COVID-19 pandemic has impacted consumer and workforce behaviors in ways that are accelerating certain market trends, escalating the importance of some technologies, and positioning specific sectors for long-term growth. Shelter-in-place guidelines have disproportionately affected in-person industries like travel and hospitality, while spurring massive growth in quarantine-friendly industries like video communications and e-commerce.

As leads of Citi Ventures' investing team, we’re constantly in contact with our colleagues to discuss trends we’re seeing, point out opportune investment areas, and share best practices for investing during this unique time. Through those conversations, we have identified five key investment categories that are likely to see strong tailwinds from these structural shifts:

1. Digital-First Customer Experience: COVID-19 is increasing the adoption of digital-first financial services platforms as customers look for financial products that don't require them to enter a physical store or branch. These customers will expect a first-class, end-to-end digital experience that includes easy onboarding, simple digital authentication, and intuitive text- or voice-based support. This will require many firms to digitize manual processes, such as physically handling paper documents, and will help drive the accelerated adoption of automation tools.
2. Remote Workforce: The pandemic has accelerated a preexisting structural shift towards employees working from home (WFH). This phenomenon creates new HR challenges related to hiring, onboarding, and retaining employees, along with new security and regulatory risks. This new paradigm will lead to companies creating new and innovative solutions that allow people to communicate and share knowledge more effectively while working securely and asynchronously in a compliant environment.
3. Supply Chain Resilience: The shutdown of international borders demonstrated how fragile global supply chains are. After decades of emphasis on supply chain efficiency, resilience and transparency will likely become the predominant factors in supply chain management moving forward, with industry experts forecasting an increase in technology adoption and the onshoring of manufacturing.
4. Next-Generation Digital Rails and Solutions for Payments: COVID-19 exposed the reality that payment rails in the U.S. are far behind other developed nations, contactless payment options are still limited, and the services available to employees in a crisis often are lacking.

   This creates opportunities on both the infrastructure side and the application side to build products that improve how governments engage financially with their citizens, offer better services to 1099 contract workers, enhance employer-driven financial services, and provide more flexible contactless payment options.

5. The Post-Pandemic Office: It is too early to tell how broadly and permanently the pandemic will shift individuals’ personal and work lives, but it's clear that the office will look different and new technology will be required to keep people safe and healthy. Companies are creating interesting solutions in smart office technology, including touchless doors, applications for health scanning, contact tracing, schedule stacking, and AI-driven monitoring solutions.

   The redefined office density required for health and safety, coupled with the increase in WFH, is likely to drive unique opportunities in both brokerage and lending for commercial real estate. In the Netherlands, commercial real estate company Cushman & Wakefield has created the Six Feet Office concept to show what a socially distant workplace might look like.

While these are only a handful of categories that we expect to flourish moving forward, it is important to note the uncertainty around what the pandemic will bring in the future and how it will affect industries worldwide. It is important that investors keep a close eye on both the legacy and emerging industries that have been successful throughout the pandemic and plan their investments accordingly.