It’s hardly surprising that, over the past three years, not
much has been said about personal finance services in the media. The world has
been entirely distracted by other matters – especially those involving big
tech, big pharma, and big finance.
Digital transformation has enjoyed massive discussions in
the context of banking and financial services. But the personal finance sector
has been undergoing a transformation of its own.
Technology has created a new wave of customers: millennials
and even younger customers are embracing a new era of financing, controlled via
mobile technology and offering so much more in terms of products and services
than ever before.
A time of change for personal finances
Anthony DiMarsico is the CEO of Banxe, a fully digital,
Belgian banking fintech that enables users to monitor the impact of their
purchases on the planet. He points out that many more young people now have an
interest in investing – a space that was once reserved for the older and upper
echelons of the banking industry. Part of this shift is down to the increased
popularity of cryptocurrency.
He says: “Many people, particularly younger people, have
become more interested in investing, especially investing in the world of
digital currencies. Investments – and DIY investments, in particular – have
become more prevalent since the first lockdown, possibly because it allowed
people more time to research and pursue what were once fleeting interests.”
But the current economic climate has also had an impact on
customer attitudes towards their finances. “Inflation and cost of living have
continued to increase, reaching record levels, leading once more to people
seeking additional revenue streams through digital currencies. Additionally,
there is general distrust towards the traditional banking system, mainly due to
the outdated banking environment and the inability to provide fast and reliable
payment options,” says DiMarsico.
New trends in the personal finance space
Makala Green, founder, and director of Green Wealth Planning
says the demand to integrate services that enable consumers to “unlock” their
financial potential and use both cash and crypto has driven huge disruption in
the financial services marketplace.
“We are seeing a rise in digital investing, such as
cryptocurrency, with a huge proportion of investors being Gen Z, which
contradicts the traditional age demographic of investing,” she says.
“There has been a surge of businesses opting for
contactless-only payments, meaning we are now experiencing the biggest
reduction in cash. However, this has also caused the need for further cyber
security; many companies need to provide end-to-end encryptions to keep
consumers' data safe.”
She also points out that digital transformation has helped
the marketplace develop business models offering better value to consumers
while making pleasing profits. New trends such as virtual meetings via Zoom,
Teams, and Google Meets continue to hold their position as many people prefer
the option of flexible working.
There is growing confidence in the use of technology, too.
“People are more confident in using apps to arrange and manage their finances
and are less reliant on high street banks to meet their financial needs,
resulting in a given rise to many budgeting and money management apps. We are
also likely to see plenty more newcomers in the future due to consumer demand,”
says Green.
DiMarsico agrees with Green and points to the 17,000
cryptocurrency ATMs in operation in America today. “It is clear the appetite for
using crypto in the same way as cash is there, be it to pay a bill, buy a meal
or use public transport. The merging of cash and crypto is a trend that will
transition to becoming the future of payments,” he says. “Using a single access
platform that bridges the gap between old and new payments brings an assortment
of possibilities and allows users to learn how to buy and trade in crypto.”
Political turmoil has caused further disruption
“One of the most significant changes that have occurred in
the personal finance space since the pandemic has been the accelerated
digitisation of risk and compliance functions,” says Stuart Esslemont, global
head of legal and compliance at ZEDRA
He comments on the fact that the industry is facing a very
volatile and rapidly evolving environment (regulatory, political, social, and
criminal). This is forcing companies to be much more agile and capable of
dealing with threats, uncertainties, data requests, and data analysis, often
with challenging deadlines.
Esslemont goes on to say that the recent sanctions
introduced concerning Russia are changing the landscape. “Regulators and other
overseeing bodies have expected businesses to be able to extract and provide
data to them within very challenging timeframes. Situations such as these are
time-critical; the potential consequences of inaction can be significant and
further highlights that investment must be made into appropriate technologies,”
he says.
In terms of a solution, Esslemont suggests businesses strive
to be more data-driven and seek to avoid having to knit it together from
multiple sources. “Deploying the correct digital tools, linked to the core
systems, will reduce the need for manual interventions and decrease the risk of
manual error.”
Digital Trust in the personal finance industry
Like all other areas of finserve, the personal finance
sector has been thrown into digitisation because of the pandemic. Resistance
has impacted full adoption, but, as Esslemont points out, “with new
technologies and a shift away from the human touch, there is an element of
trust and understanding of the tech that needs to occur before it is fully
adopted”.
The cost of implementation, the lack of specialised talent,
a high demand for the new technologies, as well as partnering with the right
provider in the digital ecosystem to implement the technology, is, he says,
fundamental to success. “Firms regulated across multiple jurisdictions may face
difficulties when mapping code of conduct handbooks, given possible diverging
regulatory requirements.”
The future of personal finance
Given the massive shifts taking place, predicting how the
personal finance industry will look in a decade seems an impossible task.
However, there are certain changes that can be expected, says Green, who looks
to customer centricity as the defining element.
“Customers in the personal finance space demand more control
of their financial future. Therefore, the future of personal finance and
fintech is optimistic; it will provide more financial education and literacy,
and be open to a much wider audience. Consumers can expect more simplicity and
efficient tools to help people take control of their finances. I believe this
will ultimately force large financial corporations to embrace the change, or
they’ll be left behind.”
DiMarsico also believes the growth of the digital currency
market will drive significant changes, both for consumers and businesses. He
says the most likely scenario involves mainstream adoption globally. “Crypto
will become so big that it will be inevitable and will become part of our daily
life. Currently, it hasn't reached mass adoption; however, platforms like Banxe
are here to change that.”
He adds, “Crypto will not replace traditional banking, but
the synergy of crypto and fiat will become common in well-developed countries.”
Click here for the
original article.