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The unprecedented events of recent weeks have put education technology in the spotlight like never before. Educational institutions have closed in 107 countries, affecting more than 860 million students and counting. The EdTech sector has leapt to a prominent position, making it of particular interest to investors as it reshapes the how we learn in real time.

Even prior to the COVID-19 pandemic, global education was no longer fit for the 21st century, making the industry ripe for disruption. The World Bank believes we are in the grips of a learning crisis, where 60% of children globally fail to achieve minimum standards of reading and arithmetic because of poor-quality teaching. Even when students are learning, their education often doesn’t include the skills they need to succeed at a time of unprecedented automation and technological disruption.

The problem of effective learning is not restricted to young people. Adults, too, are increasingly required to refresh their knowledge and acquire new skills as they change jobs and careers.

This failure to instil learning is costly, with Unesco estimating that 10% of global spending on primary education is lost through poor-quality delivery. On the other hand, Unesco data also show that quality education can increase a country’s gross domestic product (GDP) per capita by 23% over 40 years.

Simulated additional GDP between 2015 and 2090 attributable to increased learning (relative to current GDP), by scenario, selected countries.
Simulated additional GDP between 2015 and 2090 attributable to increased learning (relative to current GDP), by scenario, selected countries.

Source: Barclays Research, OECD 2010. Note: PISA = Programme for International Student Assessment (aimed to evaluate education systems by measuring 15+ year-old school pupils' scholastic performance on mathematics, science and reading)

With the help of advanced technologies such as artificial intelligence and virtual and augmented reality, lifelong learning is expected to become the norm, with education tailored to people’s individual needs as they move through their life cycles. Could this transformation happen through technology, and as the education sector is forced to embrace the change, what will come of this kind of digital disruption?

EdTech delivers new forms of learning architecture

Technology in the classroom is not new, but EdTech is no longer simply the online availability of traditional textbooks or the use of tablets in schools as a new glut of users is rapidly finding out.

We believe EdTech will redefine how education is resourced and consumed, and ultimately deliver positive results for the individual and society

Increasingly data-driven, EdTech products are applying personalisation and adaptive learning, video content, gamification and immersion technology to change the way people learn. Technologies such as after-school and adult learning apps, virtual learning environments and online degrees could redefine formal higher education and transform the traditional career path. A student can now easily upload homework through a portal, learn chemistry through 3D immersion and engage in social learning across the globe.

Online and mobile gaming

Gamification

Online and mobile gaming encourages learning through rewards and game mechanics, thus improving interaction, retention and comprehension. It can also teach social-emotional learning (SEL) and collaboration skills.

Personalisation and adaptive learning

Personalisation and adaptive learning

Adaptive learning technologies use data on individual achievements and progress to develop programmes specific to the learner’s speed, ability and interests.

Immersive technologies

Immersive technologies

Virtual and augmented reality technologies mimic real life settings in areas such as virtual field trips, anatomy and scientific laboratories. Beyond classrooms, these technologies are applied in mining, oil and gas, and medicine.

EdTech: four key investment areas

Global education is ripe for digital disruption and growth

According to HolonIQ, the education intelligence provider, less than 3% of total global education expenditure is currently digital, which suggests significant potential for transformation in a market expected to reach $10tn by 2030, up from $6tn in 2018.

EdTech expenditure is estimated to grow more than 12% every year to $342bn by 2025. While still less than 5% of overall education expenditure, this growth is expected to coincide with the increased use of technology in existing and new teaching methods. We expect to see governments around the world taking a more favourable view of online learning as a result of the disruption to standard education delivery caused by the COVID-19 pandemic.

12%: CAGR is the estimated growth rate of the EdTech industry by 2030
Source: Barclays Research, HolonIQ - Smart Estimates January 2019
Education is a $6tn industry growing to $10tn by 2030
Five top categories where Generation Z influences family spending

Source: Barclays Research, HolonIQ - Smart Estimates January 2019

The learning curve: three opportunities for EdTech to expand

  • In recent years there has been a strong shift in EdTech growth in Asia, boosted by an expanding middle class, increased educational spending and a high uptake of mobile technology. In 2018, China accounted for 63% of global EdTech investment, while the US has moved from driving 75% of global deal value and volume just a few years ago to about 25%1 now. Europe remains largely underinvested, held back by fragmented markets and heavy regulation, although the UK, the Nordics and France buck this trend.

    1Source: HolonIQ

    Regional split of VC investments
    Regional split of VC investments

    Source: HolonIQ

  • Companies are increasingly investing in their workforce, while the business-to-consumer model is also burgeoning with interactive webinars on working life amidst the pandemic fast become the norm, as modern learners seek out quality EdTech solutions (See: Gen Z: step aside Millennials). HolonIQ estimates that corporate training and Pre-school (Pre-K) will grow the fastest between now and 2030.

    1Source: HolonIQ

    By customer, corporate training and Pre-school are leading the pack
    By customer, corporate training and Pre-school are leading the pack

    Source: HolonIQ - January 2019, Barclays Research

  • With mobile apps, consumer-facing EdTech companies have created an alternative distribution channel that bypasses the traditional educational system. Advanced technologies are also beginning to emerge, including video-based artificial intelligence to evaluate learner comprehension; voice-based AI platforms interfacing directly with learners; and the use of robotics in classrooms to assist with science, technology, engineering and mathematics (STEM).

    Immersion (AR/VR) and Artificial Intelligence revolutionising education delivery...
    Immersion (AR/VR) and Artificial Intelligence revolutionising education delivery...

    Source: HolonIQ - January 2019, Barclays Research

Powering the fourth industrial revolution through EdTech

The technology behind EdTech is constantly evolving and becoming more sophisticated, and the potential implications of digital disruption to global education are far-reaching. EdTech subsequently offers a multi-year investment opportunity beyond the COVID-19 pandemic, driven by a broader socio-economic need, with the potential to scale profitability as the demand for skills to power the fourth industrial revolution continues to grow.

Read the full report

Authorised clients of Barclays Investment Bank can log in to Barclays Live to read the full report.

Download a pdf version of this synopsis

Important content disclosuresImportant content disclosures
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About the analysts

Hiral Patel is the Head of Sustainable & Thematic Investing, Equity Research. Hiral joined the team in June 2018 following five years covering the European Technology, Payments and FinTech sector. Prior to that, Hiral qualified as a Chartered Accountant with KPMG where she worked in Audit covering Financial Services. Hiral graduated from the University of Warwick with a degree in Economics, Politics and International Studies.

Anushka Challawala is a member of the Sustainable & Thematic Investing team, Equity Research. Anushka joined the team in September 2018 following two years covering European Telecoms. Anushka graduated with a BSc in Management from the University of Warwick.

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