The way people manage their finances took a different turn after the pandemic. Users are looking for more convenient and secure ways to make transactions, and contactless payments are a big player in this game. In addition, the green economy is gaining importance in all industries, and NFTs and cryptocurrencies are increasingly relevant. How is the financial sector navigating this landscape?
Anil Awasthi, senior client partner at Globant, spoke to Fintech Times about how finance is transforming and the future of fintech.
During the interview, Anil highlights how digitalization has become crucial in all customer journeys and mainstream payments. The cards tapped in the stores have gone from £45 to £100 per transaction. Retail stores have revamped their terminals to provide more payment options for customers and reduce cash transactions.
Also, traditional players – large banks – have accelerated their digital transformation journeys. What would have taken ten years took only two. The success of having an account open online is a big win for the financial sector. For instance, it takes only ten clicks to open a bank account in the online bank Monzo.
The ability to advise customers through video calls or chats has shifted customer engagement to digital engagement, posing benefits and challenges to the sector.
Banks are tackling sustainability
Sustainability has become a must-have for banks over the last few years. Banks are a central nerve of the economy, meaning they are critical players in fostering and building sustainable practices in the financial sector. A survey of more than 6.000 consumers showed that 67% would like their financial institutions to become more sustainable. Also, 58% of global consumers say they want a say on how and where financial institutions invest their money so their investments align with their values.
What are some concrete actions that banks can take to address sustainability?
- Financial institutions can leverage their customers’ transaction data to build carbon footprint calculations. Banks can link users’ purchases with environmental footprints, obtaining valuable insights and creating more sustainable practices.
- Banks can positively influence their customers and educate them on their finances’ impact on the planet. Households and consumption are responsible for 72 percent of current global emissions. Enriching existing ‘Know Your Customer’ (KYC) processes can help banks persuade consumers to adopt a more sustainable lifestyle and gain awareness of their carbon footprint.
- Ethical banking is responding to today’s social concerns. Ethical banks have explicit policies to avoid funding businesses and projects that represent in any way a threat to the environment, and they publish dedicated ESG reports.
McKinsey estimates that revenue from sustainable trade finance and cash management products will grow by 15 to 20% annually to combined revenues of $28 billion to $35 billion in 2025.
Engaging new generations
Gen Z and other generations ahead are changing the game. There is a new way of doing things ahead of us. With the rise of NFTs, metaverse, blockchain, and web 3.0, banks have the challenge of developing innovative methods to engage younger generations who have never been to a bank branch.
As the basis of the metaverse is a shared 3D space, banks can leverage its sense of collaboration to create a more human experience and a one-to-one relationship with their customers. Many banks have overlooked that people have an emotional connection to their finances. Banks can leverage digital platforms like the metaverse to build a closer relationship with their customers, providing transparency and empowering them over their financial decisions.
JP Morgan is an example of how banks are starting to leverage their presence in the newest digital spaces. The bank opened the Onlyx lounge in the popular game Descentraland. The company’s report highlights the opportunities for banking in the metaverse: Transact, own, experience, crate, and socialize.
Reinventing financial services
It is no secret that industries are looking for ways to reinvent themselves to keep up with the rapid pace of digitalization. Visit our Finance Studio and explore how we assist businesses to level up their commercial strategy, adopt new open banking trends, and more!