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Fintech – The Future of Financial Services by Ritesh Jain

“Pandemic – an unplanned social experiment will have a long-lasting impact on the financial services and how customers will perceive value in future.”

There has been an unprecedented jump from traditional service offerings to digital services due to the Coronavirus pandemic. Traditional banking services have already become out-dated before the pandemic hit. In the aftermath, digital services, contactless payments, virtual banking and cross-border transactions are quickly becoming the new normal.

Fintech is leading digital innovations.

“Banking and Financial Services need to become highly valued customer-centric partners whose priority is customers’ overall financial wellbeing”.
Recent research stating that 70% of global consumers use digital banking channels every week.The future of banking and the future of payments are swiftly changing. Much of the growth seen in the alternative financial services market can be attributed to fintech companies and start-ups.

Fin-tech offers a unique approach to managing your personal and company finances. The goal of fintech is to serve the consumer and make banking and other financial services more accessible and easy to use than the traditional services currently offered. Fintech is influencing disruption across multiple industries from retail businesses, fundraising and non-profit organisations straight through to investment management.

There is much to be learned about the future of banking and payment. The learning process can be a collaborative process of advising and consulting with financial institutions, consulting firms and fintechs. Considering a few exceptional companies like Transferwise and Paypal and the real effect they are already having on consumers and their role in levelling the playing field while giving equal opportunities and resources to all people. We have to admit that fintech companies are experiencing exponential growth and are on the fast track to being consolidated into the star player’s financial industry. The development of fintech, start-up ecosystem leads to corporate investment and global economic growth.

My Fintech predictions in 2021

Digital payments and contactless deliveries will become the norm. Fintech innovations will take a lot of the hassle out of financial services, no longer having to wait in a queue at the bank, digitalising credit applications, and enabling fast and reliable domestic and international payments. Additionally, more businesses will adopt a cloud-based infrastructure to offer their clients digital payment options, increasing these services’ expected use. The increased need for digital payments has opened up a lot of room for growth in online payments and a driving factor in financial institutions efforts to accelerate digitalisation.

With the increased use of social media and many social media platforms’ transformation into virtual storefronts, my prediction is that social media, eCommerce, payments, and rewards will converge. It will create many new ways for consumers to discover and purchase products with no additional advertising costs. I also expect eCommerce to see a considerable increase in growth in the coming years as the pandemic’s effects will likely be felt for a while still and consumers enjoy the convenience of online shopping.

In the cryptocurrency platform, I predict a rise in people willing to invest in and use cryptocurrency. Central banks are rushing towards Central Bank Digital Currencies, which is still distant in the future, not before 2022. Many prominent fintech companies accept bitcoin over the years, such as PayPal, which allows its users to buy and sell Bitcoin. The world’s largest online payment processing company MasterCard has announced that it will keep the digital asset part of its digital assets portfolio. crypto will continue to play an increasingly important role in the coming years, not only in finance, but also in other sectors such as health care, education, and finance
Bitcoin is predicted to remain strong in 2021. I expect that Bitcoin will be acknowledged as an international payment currency and that Bitcoin will serve as a hedge against inflation and take up gold’s market share. I also think that the blockchain’s regulatory influences will strengthen and that the blockchain will split into two: white-chain and dark-chain.

With the introduction of stable CBDC’s will see fall in Crypto’s in the future, it’s creating opportunities for investors.

Artificial Intelligence in banks and fintech companies has been used for fraud prevention for more than a decade. My predictions are that AI will be applied in new innovative ways in 2021. It will be coupled with Machine Learning for better fraud detection and risk management and increase user experience through shared intelligence. Other use cases in the front-end of banks algorithms that aid in customer identification & enhanced algorithms can also mimic employees through chat boxes/ chatbots and voice assistants. Other implementations are in Middle office functions. They use AI to improve anti-money laundering processes and perform Know-your- customer (KYC) regulatory checks to bring operational efficiency and reduce cost.

“The magic formula of digital success is “DX + AI = Awesome CX” – digital transformation (DX) needs AI to personalise customer experience (CX) so that we treat each customer as unique individuals with unique needs in life, as well as do it in a way that is frictionless and seamless.”

Challenger banks like Revolut, Monzo’s, N26 will have to start charging their clients’ subscription funds to generate the revenue they need to survive or extend their services bring in deposits and revenues. The current business model relies on Client Incentive Agreements to create profits, and this business model will not be sustainable in the long run. Banks may be vying to build partnerships with fintechs, the reason for this being fintech companies offer all the services that consumers want: Secure, fast, reliable and affordable financial services that boast inclusivity and a global client base. If banks acquire fintechs, they will have access to all of the digital innovations and technological structures that fintech companies already have in place.

“Digitalisation, if done in the right way, can build a people-oriented culture, which considers and focuses on empowering people within the organisation, which leads to engaged customers, along with process optimisation and transformation of processes.”

Open banking will thrive as it is becoming regulatory across key markets worldwide, though the US is adopting slowly. Open banking leading a paradigm shift for banks and their operating models. There will be increased use of Open APIs. Open data will give customers control over their data beyond banks’ information and support innovation and build better services like wealth, pensions, investments, utilities, etc. and moving towards open finance.

Customers benefitting from competitive services regardless of the provider, the risk is banks might become invisible to customers.

Open Banking, coupled with Payment Orchestration opens payments systems to adopt change and introduce new, disruptive payment services cheaper, faster, and frictionless. It could well be the catalyst for the widespread open banking services adoption.

Acceleration in financial Inclusion- Pandemic has put a spotlight on Financial Inclusion. Financial Inclusion is not limited to unbanked or specific geographies it’s a global issue, UK has 1.3 Mn unbanked people, while 7.1 Mn Households in the US has no bank accounts, the large global population is underserved which fintech’s are addressing. World Bank, G20 Global Program for Financial Inclusion (GPFI) and other initiatives are addressing this through structured programs by the introduction of regulations, government initiatives for national identity programs. Fintech, financial institution and government partnerships for agency banking, mobile money, social finance will play a crucial role in improving financial Inclusion.

In the future, we may see a more significant consolidation of fintech companies where more established corporations may buy newer companies. This transaction is beneficial to both parties where the new companies gain resources and support while offering digital innovations and a new consumer market.



Future of Banking and Payment

Forrester recently put forth their view on the future of baking which I agree with. Future baking will be Invisible, with banking services entering only in the consumer’s moment of need. Banks must aim to be Connected and maintain a presence in the consumer’s environment and the products they use. Banks will become more Insight-driven, focusing on creating, building, and finally keeping consumers’ trust. Finally, banks need to be more Purposeful, aligning their values and beliefs with their clients to develop purposefully shared values. A few different trends highlight the future of payments. Artificial Intelligence and Machine Learning are becoming a large part of the payment process as these applications capitalise on all forms of consumer data. This enables companies to evaluate consumer profiles more effectively and deliver a faster and more effective service. Secure and flawless payment methods are becoming a priority, coupled with multiple payment channels from various applications.

Mobile Commerce Expansion is a significant factor considering the still-growing increase of smartphones and social media. Many social media outlets have been monetised and offer virtual storefront to consumers. Finally, cross-border payments are becoming more common, and big companies are expected to collaborate and fintech to provide continuous solutions to their clients.

During the pandemic with online shopping becoming the norm, the Buy Now Pay Later platforms experienced growth. With customer coming to expect flexibility in how they shop and how they pay companies like Klarna, Afterpay and Affirm are here to stay. I expect that these companies will experience exponential growth and become consumers’ first choice, given their interest-free and delayed payment options.

On the other hand, Buy Now Pay Later is enticing consumers to buy more than they can afford by offering payment convenience at checkout. These companies offer credit to consumers without completing any pre-emptive credit checks to determine the likelihood of those consumers upholding their payment responsibly. This can present a threat to the digital trading system’s financial security. Each country should decide on a collaborative set of regulations to govern Buy Now Pay Later systems’ operations.

Fintech companies are on the fast-track to become industry leaders.

Fin-tech equals growth. Fit-tech is leading with innovations, and the development of the movement cannot be ignored. We have seen the change, and it is unstoppable. Globally, fintech is reaching new heights because it does not have any technological baggage. Take a look at some of the most prominent fintech companies leading the industry in innovations and advanced technology developments. Chime in the banking industry is a mobile bank offering no-fee and automatic savings accounts and high-speed direct deposits. Chime boasts one million opened accounts and is well on its way to becoming one of the United States’ biggest banks.

Blend operates as a digital lending platform and simplifies the loan process and gives consumers a more transparent summary of their finances. The app uses data verification software and low-touch pre-approval processes to automate the lending process for anything from mortgages to car payments. Tala is a company that provides access to credit to people who do not have an existing credit record and who lives in remote areas where such services may not be traditionally available or accessible to consumers.

The current ecosystem & regulatory changes are supporting innovation & new companies to come into existence and flourish.

Ecosystem and value creation is not limited to customers it is for the financial & economic growth, need for Start-ups / Fintechs turned unicorns to go public using special purpose vehicle influencing the growth of Special Purpose Acquisition Company (SPAC), purchases in the fintech market are growing significantly, partly due to the coronavirus pandemic creating financial uncertainty and the flourishing ecosystem fintech companies have made where SPAC’s can combine with specific target companies to help them reach their goals.

(Contd. in PDF)

Ritesh Jain

Ritesh is humanising credit and credit cards. He is an Entrepreneurial Technology Leader, Board Advisor with global experience across various sectors including Payments & Banking. He led the future of payments for VISA, and introduced Apple Pay, built a wealth management company as a founder CTO.

Presently, he is a member of a G20 Initiative for Financial Inclusion; Advisor to Open Banking in EU & Africa, Harvard Business Review (HBR), payment regulators and government bodies for social and financial Inclusion a member of MIT Global Tech Panel. He is a visiting lecturer, regular speaker & author, Diversity & Inclusion advocate. Past roles include mentor to the UK Parliament Digital Service & Startups.