As inflation continues to rise to a 10 year high, financial optimism amongst consumers has fallen for a second quarter in a row whilst the use of BNPL rises; TransUnion’s latest Consumer Pulse study has found.
When asked how confident they were about the future state of household finances in Q4, only 48% of respondents said that their outlook was one of optimism, a figure that has dropped from the 61% recorded in Q2.
Worrying still, 31% of respondents said that Q4 has seen them experience a worse financial position than expected, a 4% increase from Q2.
The end of the furlough scheme, combined with growing cost of living pressures, has meant that consumer confidence indexes are at the lowest they’ve been all year, reflected in 75% of consumers saying they were worried about the rate of inflation.
The rise in living costs has eroded spending power, with 43% of consumers reporting that they’re moderating their spending. These figures are even higher among younger age groups: 47% for Gen Z and 61% for Millennials.
“Whilst it’s concerning to see consumer spending waning, the borrowing figures offer some reassurance,” comments TransUnion’s Chief Product Officer Shail Deep. “One in four say they still intend on applying for credit or are planning on refinancing their existing lines of borrowing in the next year, the same proportion as in Q3. The fact that alternatives to more traditional credit, such as buy now, pay later, are seeing continuing growth suggests consumers are looking at ways to spread costs as they weather current pressures.”
Indeed, spenders are increasingly turning to the buy now pay later (BNPL) financing option, with this sector experiencing significant growth during the pandemic. 35% of consumers stated that they used this type of payment in the last 12 months, alongside the rapid acceleration of ecommerce adoption and ingrained changes in consumer borrowing habits.
Despite the notion that BNPL is used almost exclusively by younger spenders, the data shows the adoption is across all age groups. 31% of Gen X’ers said they had used BNPL in the last year, in addition to 58% of Gen Z, and 60% of Millennials.
Crucially, consumers appear to be using such products out of the desire for greater flexibility, rather than necessity. According to this new data, half of those who had used BNPL products in the last three months said that they had done so in order to spread payments over a longer period of time.
“What used to be perceived as an option used solely by younger generations is now being harnessed across the board and our own analysis of this sector has shown that flexibility is the key driver here,” Shail continues. “With consistent consumer spending essential for the wider economic recovery post-pandemic, consumers need to have a range of avenues available to them and it’s encouraging to see that BNPL is helping consumers manage costs, with one in 10 using this over the Christmas period, according to our own survey.”
With plans to launch initially in Mexico before expanding to Colombia and Central America, fintech startup Jefa is out to do what even the most innovative challenger banks have so far failed to do: bring better financial opportunities to women in Latin America.
Company CEO and founder Emma Sanchez Andrade Smith highlights the fact that nearly 1.3 million of the world’s 1.4 million underbanked people are women. Add to this the problem that the majority of new, digitally-oriented financial institutions are focused on mature markets in Europe and the United States rather than in emerging markets. Combined, these two facts represent a major challenge for women in developing markets – and a potential opportunity for creative fintech entrepreneurs.
Jefa announced earlier this week that it has secured $2 million in seed funding to bring financial empowerment women in Latin America and the Caribbean. More than a dozen investors participated in the round, including The Venture Collective, DST Global, Foundation Capital, Amador Holdings, The Fund, FINCA Ventures, Rarebreed VC, Siesta Ventures, Springbank Collective, Bridge Partners, Hustle Fund, Foundation Capital, Latitud, J20, and Magma Partners. A number of angel investors such as Daniel Bilbao, JP Duque, Ricardo Schaefer, Jean-Paul Orillac, and Allan Arguello were also involved in the financing.
Founded in 2020, and an alum of TechCrunch’s Startup Battlefield, Jefa has 115,000 women on its waitlist and the backing of Visa, with whom the firm forged a seven-year strategic partnership. The alliance will enable Jefa to launch a Visa card for the Mexican market, where more than half of the country’s women are unbanked.
“Visa believes in empowering women – from entrepreneurs to home-makers,” Visa Latin America and the Caribbean Senior Director of Fintech Partnerships Sonia Michaca said. “Financial and digital inclusion transform economies. Women, who control the lion-share of everyday household spending, should be at the core of this transformation, yet women are vastly underserved by traditional banks.”
Visa sees the partnership also as a way to help respond to growing demand for contactless payment options. A recent study led by the company underscored rising interest for contactless payments from women in Latin America, with 44% of female consumers in Brazil reporting more frequent use of contactless payments and 58% saying they would not shop at a store that did not offer them. With Jefa, women need only a government-issued ID to open a free, “no minimum balance required” account and access built-in savings apps as well as other “women-tailored features.”
“Jefa is a solution for women that empowers them with the tools they need to create a better livelihood,” Smith said. “At Jefa, we take a multifaceted approach that addresses the numerous barriers women face to entering the global economy. This includes using gender-disaggregated data to inform our product, designing distribution channels to reach women in place they trust, and providing services that are tailored to their distinct financial behavior.”
A graduate of Duke University and The London School of Economics and Political Science (LSE), Smith previously co-founded Eversend, Africa’s first neobank, in 2018. She was also the director of Togo-based Microfinance des Jeunes de Farende where she launched and ran the first microcredit organization for youth in West Africa.
Noting its digital banking advancements, TD Bank Group reported net income 26% lower year over year for the fourth quarter, but up 20% overall for the fiscal year ended Oct. 31. The $1.3 trillion TD Bank Group is focused on its long-term strategy and enterprise priorities, which include leveraging data analytics and artificial intelligence (AI) […]
A pair of $200 million funding series C rounds capped off a strong week for fintechs, with major financing going toward core banking development, buy now pay later (BNPL) technology, and data-centric credit solutions for businesses and consumers. Thought Machine hits $1B valuation in latest funding round London-based fintech Thought Machine closed out a $200 […]
Facebook Messenger unveiled today that it will pilot a feature that will allow users to split payments in the Messenger app. Facebook will begin testing the “free and fast way to share the cost of bills and expenses” next week for users in the U.S.
In a group chat or payments hub within Messenger, users select “get started” and can split a bill evenly or modify each person’s contribution amount. After the amounts are determined, users enter a personalized message, verify their Facebook Pay details, and send their request in a group chat in Messenger.
The launch of Facebook Messenger’s Split Pay feature comes as “Request to Pay” is heating up in the fintech world. Venmo has used QR codes to facilitate person-to-person payments since 2017, and Messenger began using similar functionality in June of this year.
Outside of the P2P realm, Request to Pay is becoming a popular way to replace payment methods such as cards, invoices, and direct debits in B2C and B2B transactions. Essentially, customers can pay for everyday purchases within a messaging framework. Shoppers can, for example, pay for their lunch by opening a push notification on their phone and accepting the payment, thereby finalizing the transaction.
Money20/20 USA was concluded in late October at The Venetian Resort, Las Vegas. The event was a resounding success, with big boots to fill following Money20/20 Europe‘s positive response, which saw more than 4,000 attendees from 1,500 companies take part. The American counterpart had an even bigger turnout with more than 8,000 attendees, from over 2,500 companies participating.
“It is fantastic to celebrate the successful return of Money20/20, the industry’s leading fintech event, with Money 20/20 USA being one of the largest convened anywhere for nearly two years. With a quarter of all attendees being C-Suite and above and more than 14,000 meetings booked via the app across the two events, Money20/20 has proved once again to be the place where decision-makers meet, new partnerships are forged and business gets done”, said Money20/20 President TraceyDavies.
At the centre of the ecosystem, attendees also came to Money20/20 to hear from best in class speakers covering crucial topics shaping the future of the industry. At Money20/20 USA more than 300 speakers, carefully selected from nearly 1,000 submissions, engaged in four days of conversations that will have a direct impact on the industry moving forward. Key themes this year ranged from infrastructure, the intersection of payments through things like crypto and BNPL, and financial inclusion, in particular the provision of financial products and services for underserved, minority communities.
The Money20/20 RiseUp Programme and Stage, in partnership with Trustly, highlighted the challenges and the opportunities that diversity brings. Money20/20 has long advocated that women and people of colour should have a louder voice and more seats at the table in financial services. The RiseUp Programme helps amplify those voices, opens doors and collaborates with our community to empower real change. In support of these values, nearly 40% of Money20/20 USA speakers were women and 29% were speakers of colour.
Amongst the many brilliant speakers that took to the stage at Money20/20 USA were:
Earvin “Magic” Johnson, Chairman and CEO, Magic Johnson Enterprises
StephanieCohen, Global Co-Head of Consumer and Wealth Management, Goldman Sachs
JelenaMcWilliams, Chairman of the Federal Deposit Insurance Corporation
UmarFarooq, CEO, Onyx by J.P. Morgan
EricSager, COO, Plaid
TimSheehan, CEO and Co-Founder, Greenlight
RyanGlover, Chairman/Co-Founder and Michael Render aka KillerMike, Investor/Owner, Greenwood
NikilViswanathan, Co-Founder and CEO, Alchemy
JasonGardner, CEO Marqeta
NoahKerner, CEO, Acorns
UmeshSripad, Chief Digital Officer, IKEA
LiorRon, Co-founder and CEO, Uber Freight
DaymondJohn, Founder/CEO of FUBU, Presidential Ambassador for Global Entrepreneurship, Star of ABC‘s Shark Tank and CEO of The Shark Group
VanessaVreeland, Head of Truist Ventures, Truist
AlissaKnight, Partner, Knight Ink
AlexisOhanian, Co-Founder, Former Executive Chairman / Venture Capitalist, Reddit / Founder of Seven Seven Six
AlexHonnold, World Record Rock Climber, Star of the Academy-Award Winning Documentary, Free Solo
DanicaPatrick, Entrepreneur, Podcast Host, Author, Former Professional Driver
GarretMcNamara, Extreme Waterman, World Record for Riding the Biggest Wave, Star of the HBO Documentary, 100 Foot Wave
There were also more than 150 media and industry analysts at the event to report on the many significant industry announcements, including:
Mastercard’s partnership with Bakkt, that will see them offer a range of crypto services to any of the thousands of banks and millions of merchants on its payments network.
Wise, the cross-border payments provider with around 11 million customers, including 300,000 small businesses, confirmed that acquisitions were not on their agenda, despite their recent listing that valued the company at $11billion.
Nium, the embedded finance company, announced the extension of its range of Banking-as-a-Service products to include cryptocurrency buying.
Socure, the digital identity verification and fraud solutions provider, announced the launch of Socure Sigma Identity Fraud, which will enable enterprises and government agencies to dramatically increase auto-approval rates and reduce fraud losses, false positives, friction, and costs associated with manual reviews.
Alchemy’s announcement that they had closed a $250million funding round, which values the business at $3.5billion, making it one of the largest and fastest-growing crypto unicorns.
Grow Credit launched three new Credit Builder Plans that help US consumers establish and build credit by leveraging their monthly subscription payments.
In this week’s podcast, the Bank Automation News editors discuss the technology lessons that can be gleaned from the earnings calls this week from the “Big Six” Canadian banks. The Royal Bank of Canada, Scotiabank, National Bank of Canada, Bank of Montreal and the Canadian Imperial Bank of Commerce reported earnings. Technology-related announcements played a […]
Canadian Imperial Bank of Commerce (CIBC) credits digital investments and a cloud-first strategy with its 2021 growth, which saw adjusted revenue increase 7% year over year. The $653.6 billion bank reported $15.6 billion in adjusted revenue for 2021 on Thursday’s earnings call. Adjusted net income was $1.3 billion, up from the $1 billion reported in […]
The evolution of identity verification in the modern economy
Identity verification has made considerable strides in recent years as it continues to evolve alongside the modern economy. From loan applications to opening bank accounts, cryptocurrency trading and more, identity verification plays a pivotal role in building trust among businesses and their customers. Identity verification is an essential requirement in most processes today, both online and offline. With blue ocean opportunities on the horizon as technology, risks and threats continue to evolve, it’s easy to overlook the magnitude of influence identity verification has in our daily interactions. As we continue to set our sights on emerging opportunities, here are the top 10 reasons financial institutions need to evolve with identity verification. 1. Identity is always changing
Prior to the mass adoption of technology and the digital lifestyle, impersonation was conducted through physical means, such as a stolen wallet or identification card. As such, the main unique identifiers at the time mostly focused on name, address, date of birth and social security. With the transformation of digital fraud, identity theft requires a more sophisticated plan to pull off successfully. To prevent this, data networks continue to become more robust and now include unique identifiers for credit data, email, phone numbers, government-issued ID numbers and more.
Advancements in biometrics
From the first state-wide automated palmprint database in 2004 to Apple including fingerprint scanners in smartphones in 2013, biometrics continues to be a buzzword in the identity verification industry. As the latest development in identity verification, biometrics offers the ability to verify users through geolocation, fingerprints, or facial recognition.
Backed by an unbeatable level of security when it comes to mitigating identity theft, it should come as no surprise that forward-thinking businesses are looking to implement this feature as part of their onboarding services. 3. Increases in identity theft
As data breaches and cyberattacks continue to rise year over year, there’s a constant threat of fraud and identity risk. With financial firms being 300 times more likely to be a target than other institutions, customers need to be able to trust that the organisations they’re doing business with are ensuring that their personal identifiable information (PII) will be protected.
Consumer-centric approach to identity verification
With the introduction of digital banks and financial services, consumers are no longer restricted to the services that are available in their neighbourhoods. With more competition and options to choose from, consumers can afford to be selective as they become more security-conscious and look for frictionless onboarding processes with improved protection. Previously seen as a pain point in the user experience, financial institutions are beginning to embrace their identity verification process to apply a more consumer-centric strategy. This can yield favourable results as businesses can achieve reduced friction and increased security while fostering better customer relationships.
Digital account creation abandonment
Based on recent research from Deloitte, it was revealed that at least 38 per cent of customers drop out of the onboarding process, often as a result of frustration with the sheer volume of touchpoints and paperwork involved. With a much-needed balance between attracting, retaining and growing customers, financial institutions should be looking to leverage passive and active security features to help facilitate frictionless and secure onboarding. 6. Multi-layered approach to authentication for heightened security
To help stop criminals in their tracks, multi-factor authentication provides a layered defence to make unauthorised access of accounts, data and devices more difficult. For financial institutions, this requires the ability to access extensive data sources that are fast, reliable and accurate. 7. Access to more reliable data sources
As the most important factor in regulatory compliance and risk mitigation, identity verification is only as reliable as the data sources behind it. Fortunately, through partnerships with organisations like Trulioo, financial institutions can have access to more data sources than ever before with 400 data sources for more than 80 countries and access to active mobile network operator data. 8. Continued increases in digital growth
With more than 14 billion active mobile devices worldwide, more people than ever before have the potential to access the digital economy. As digital services continue to evolve and expand, digital identities are crucial in creating fairness, transparency, and trust. However, they will first need to be established to be granted access.
More users requires efficient processes
Aspects of identification and verification may be ever-changing but financial institutions must consider streamlining their processes to keep up with the changing times. This kind of responsiveness will allow financial institutions to properly scale their operations while mitigating emerging threats and risks and remaining compliant with evolving regulations and compliance requirements.
Minimise resource strain with one-stop verification solutions
As technology improves, regulations evolve and customers want better service, financial institutions need to leverage verification services that will fit their business needs now and in the future. By using solutions to automate efficiencies, organisations can adopt a customisable and strategic approach to identity verification that will help reduce costs over time and offer a better experience to customers. Put your best foot forward with your identity verification solution Identity verification technology holds the key to helping financial institutions onboard customers in an efficient and safe manner. By leveraging the latest in today’s technology, organisations can ensure they remain compliant and onboard quickly while reducing fraud. In turn, this forward-thinking approach will build customer loyalty through a good first impression that makes them feel safe and secure.
According to a survey recently commissioned by Finder, 23% of Americans own some form of cryptocurrency, reflecting an increase of more than 60% over the past two years. As consumer interest in digital currency grows, community banks and credit unions need to find ways to bring these digital assets and capabilities to their customers. For […]
Xero, the global small business platform, has announced a significant milestone in its AI strategy with the roll-out of new bank reconciliation predictions. The predictions feature brings a new application of AI into the Xero platform, reducing manual data entry and saving businesses time.
The new feature uses machine learning to predict the contact and account code for transactions that cannot be matched to invoices or bills using an organisation’s bank rules, Xero’s matching logic, or memorisations. Previously, businesses had to manually enter new contacts or account codes to reconcile these transactions — a time-consuming process that risks manual error.
Bank reconciliation predictions adds to a growing portfolio of Xero’s AI enabled product features, most recently Analytics Plus, a suite of planning and forecasting tools, powered by artificial intelligence and designed to help businesses and advisors plan for the future with confidence. Xero also uses two core machine learning techniques —text classification and entity recognition — to free small business owners and employees from repetitive tasks with automatic form filling in both Hubdoc and Xero Expenses.
KendraVant, EGM of Data said, “As we continue to leverage AI to build rich customer experiences, we’ll streamline more and more critical business tasks and processes for our customers, whether it’s reconciling transactions, filing expenses, or forecasting for the future.”
Harnessing AI forms part of Xero’s global data strategy, building on the data flowing through the small business platform to create new capabilities that improve the Xero experience for businesses and advisors, save them time and deliver insights to help them plan for the future.
Bank reconciliation is one of Xero’s most used features, with more than 1.7 billion transactions reconciled in the Xero platform over the past 12 months. The machine learning algorithms for bank reconciliation predictions learn from millions of these historical reconciliations across different organisations. As the algorithms improve over time, businesses can complete bank reconciliation faster, with more accurate information and reduced manual data entry.
“While each small business is unique, there are many patterns we can learn from the reconciliation activity of our millions of subscribers globally. This scale and reach allows us to tap into the ‘wisdom of the crowd’ and reduce toil for small business owners, while maintaining the security and assurance they expect from our platform,” Vant said.
“With these new bank reconciliation predictions, we can suggest to a user that money spent at an office supply store is likely to belong in Office Expenses, even if it is the first time you’ve shopped at that store.
“This may seem inconsequential, but any time spent on manual data entry is time not spent on the business. By streamlining a core task like reconciling bank statements, we’re able to reduce stress and give business owners more time in their day, while making sure their data is accurate and up-to-date so they can plan with confidence with their advisors,” Vant added.
The data team at Xero has expanded in the past two years and now operates from Australia, New Zealand and Canada. Xero’s team of data scientists and engineers work to integrate different AI applications across the Xero product suite, giving them opportunities to contribute to Xero’s growing portfolio of machine learning products operating at scale.
The new bank reconciliations predictions feature will roll out in phases to all customers. As Xero continues to improve these algorithms, users will see Account and Contact predictions in bank reconciliation more frequently.
Applications for the Innovate Finance Women in FinTech Powerlist 2021 are now open. The list aims to recognise the pioneering women championing financial innovation over the last year.
The 2021 Powerlist aims to reflect the multidisciplinary and changing nature of the fintech ecosystem and the women who are driving it forward. The 2021 Powerlist will shine a spotlight on 200 women across 9 categories who have made a real impact over and above their day-to-day role.
This year two new categories have been added: Hubs and ESG. The Hubs category is open to women who work in international and national hubs or ecosystems; non-governmental organisations; schools, colleges or universities. They are seeking examples from those who go the extra mile to link industry and academia; or who convene a community of fintech innovators to create a responsible, diverse and inclusive culture. The ESG category seeks to recognise the women who are going above and beyond to embed environmental, social and governance principles into the fintech ecosystem; or who have founded, or lead, a firm that uses fintech to solve some of the key problem areas facing society.
As the Powerlist has grown in size and popularity, Innovate Finance felt that it was only fair to highlight the ever-growing community of women who are making such an impact on our sector.
The panel of independent judges will select the Standout 45; those who are making a real and lasting impact in fintech, over and above their day-to-day role.
The judging panel consists of:
Andy Ayim MBE, Angel Investing School
June Angelides MBE, Samos Investments
Ezechi Britton, Impact X Capital
Clara Durodié, Cognitive Finance Group
Amy French, Level39
Stephen Ingledew, FinTech Scotland
Either apply yourself or nominate someone who deserves recognition, deadline for applications is 16th January 2022.
Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.
As 2021 draws to a close, it’s safe to say that this year has been full of ups and downs. With the world very cautiously emerging from the global pandemic, one thing has remained constant: the innovation and growth the fintech industry continues to bring. While the year has been a whirlwind for most, the fintech sector has seen many challenges and opportunities that will no doubt continue into the next 12 months.
This December, The Fintech Times is asking industry leaders for their ‘View from the Top’ to gain an insight into the decisions behind the last 12-months. Today, we hear from Michael Chin, Yusuf Ozdalga, James Booth, Julie-Ann Haines, and Samir Pandiri on their 2021 thoughts, plus a look ahead to 2022. Will there be a Happy New Year? Read on…
Michael Chin is CEO of Broadway Technology, and believes that “After years of relative stagnancy, fixed income trading went through something of a renaissance in 2021.
He continued: “One of the well-documented pandemic outcomes for bank trading desks was the accelerated pace of electronification in fixed income trading. Virtual trading environments continued and required shifts in how liquidity was sourced for asset managers, how traders interacted with their colleagues and how the banks themselves interacted with clients. Banks realized how critical their workflows were to connect risk, sales and trading functions so they could focus on optimal pricing, response times, execution quality and innovation.
“In 2022 financial institutions will focus on how to integrate tools and data – both internal and third-party – more directly into their trading workflows and leverage that intelligence to improve execution quality and decision-making. They will push their own developers and service providers to build with interoperability in mind, emphasizing open frameworks more than in the past to either protect IP or ensure stickiness. Banks and service providers will recognize the value of using existing software or data where trading activity is commoditized, and turn to custom, specialized or preferred applications for trades where IP creates a competitive edge.”
Yusuf Ozdalga, the London and EU Principal for QED Investors said the trends of the year revolved around embedded finance:
“In 2021 embedded finance became mainstream. Non-fintech businesses increasingly used embedded finance as their monetisation route even though fintech was not their core business. We may see the mirror image of this in 2022 – companies going fintech first, and then building non-fintech businesses on top. For example, using fintech tools to attract customers, and then building marketplaces on top.
“Web 3.0 and Metaverse were also big trends in tech and their reflection in the fintech universe were NFTs that posed the question; What does it mean to own something that only exists digitally? In the art world, Beeple was at the forefront of tackling this question, and profited handsomely, becoming multimillionaires overnight.”
James Booth, VP Head of Partnerships (EMEA) at PPRO believes that digitisation was still key in 2021, and will continue to the future.
He said: “In 2021, the world has truly gone digital. Seventy-five per cent of people have said they’re now shopping more online, compared to before the pandemic. As an effect of this, more merchants and companies than ever before are realising a digital-first approach must guide their businesses—and this includes payments.
“Digital payments give customers the flexibility and ease of experience that’s no longer a “nice-to-have”, but an essential part of any experience involving payment.
“Specifically, with digital payments, we’re seeing that buy now, pay later (BNPL) has taken off. Just in this last year, the leading five BNPL services have garnered a staggering 100% growth overall. E-Wallets, like PayPal, WeChat Pay, or AliPay, are also on the rise, accounting for 40% of transactions globally, and 60% in APAC.
“Generally speaking, digital payments are the future. But soon they’ll just be “payments” because some form of digital payment will be a part of everything. Payments, increasingly, are moving even more towards the background and eventually will be part of a wider buying journey that we barely notice—”frictionless,” as we like to say.”
Julie-Ann Haines, CEO at Principality, believes collaboration and partnerships have been a key feature in 2021.
“It has been a great year for collaboration across the sector, with a number of bigger businesses partnering with early-stage fintechs, working on new solutions for customers, learning how smaller, more nimble fintechs operate, and helping them to hone concepts that they can then scale. For instance, this year at Principality we’ve been supporting the new Fintech Wales Foundry – an incubator for start-ups and an accelerator for scale-ups. It’s really helping to put Wales on the map as a driving force behind new technologies for financial services.
“We’ve also seen a real broadening of the support networks for fintech in Wales this year, with more of the well-established financial services players starting to see the benefits of working with and mentoring dynamic young fintechs. Going forward, we’re really confident that we can continue fostering these support networks available to fintech firms locally – both in terms of finance and infrastructure but also mentorship.”
In terms of the future, Julie said: “As the digital revolution within financial services continues at pace, we need the high-skilled workforce to match. There’s a real and pressing need for talent with skills in coding, UX and data analysis, as well as a greater appreciation for cybersecurity expertise. In 2022 the skills shortages are only likely to accelerate. Indeed, the 2021 Kalifa review of Fintech in the UK was a real eye-opener for some, having identified that skills shortages and lack of retraining programmes as a real barrier to the growth of the sector going forward.
“I’d also expect to see a greater focus on opening up the sector in 2022. The sector as a whole undoubtedly trails behind other areas in its representation of women and BAME talent. We can only truly unlock the potential of fintech with a more diverse talent pool, so 2022 needs to be a year of real talk and action.”
Samir Pandiri is President at Broadridge International believes the “outbreak of Covid-19 put a fresh spotlight on the challenges that financial services firms have been facing for quite some time.”
He said: “These include increased regulatory requirements, and the need to digitally transform and modernise legacy infrastructure. These are tricky obstacles to overcome while simultaneously looking to minimise costs and maximise returns. As a result, the industry has seen an increasing number of banks partnering with managed services providers to adopt a mutualised service delivery model.
“In 2022, the accelerated adoption of technologies such as AI, Blockchain, the Cloud and Digital will certainly continue – and across the full spectrum of financial sectors. At the moment it is universal banks and full-service financial institutions that are leading the way and are the most likely to have scaled adoption across their organisations. However, commercial banks, investment banks and insurance companies are quickly catching up and are investing in these technologies for a range of different uses.
“Blockchain will also play a critical role when it comes to new payment technologies. There have been lots of national pilot schemes this year that have been evaluating the potential around central bank digital currencies (CBDCs), and it will be interesting to see how this will continue into the new year – and the impact it will have on the popularity of cryptocurrencies. I also believe that the pandemic will have a lasting impact on our everyday payments habits: contactless payments, digital wallets and QR code payments will become even more popular in 2022.”
Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.
Recently in the news, Hillary Clinton, the former Democratic presidential candidate in the 2016 elections, warned that cryptocurrencies could destabilize countries and undermine the role of the US dollar as a reserve currency. Clinton said Russia and China are manipulating cryptos and the Biden Administration needs to regulate the cryptocurrency market. As bitcoin and other cryptocurrencies have now gone mainstream, financial regulators in Washington have started to express increasing concerns about bitcoin and other cryptocurrencies. Institutional investment managers like JPMorgan and Blackrock, which initially opposed bitcoin, are now helping their clients invest in cryptocurrencies. El Salvador in early September declared the cryptocurrency to be legal tender, allowing it to be used for payments. Last month the first bitcoin ETF was introduced on the New York Stock Exchange, allowing U.S. investors to speculate on Bitcoin prices without actually owning it. But so far US regulators have been more focused on regulating cryptocurrencies in the context of capital controls, securities fraud, and tax evasion. The US knows how privileged it is to have its currency function as a global reserve. As more powerful institutions and other countries adopt in cryptocurrencies, the US government will increasingly be pressured to take a stance on the new asset class. If bitcoin and other cryptocurrencies are here to stay, what will the future look like? The answer is complicated.
Editor note: The geopolitics of Bitcoin as US faces the end of global reserve currency is very interesting.
Neobanks (regulated digital only) are hot right now with 5 already in the Fintech 50 Index, many more lining up to IPO and top tier investors (including Warren Buffet in Nubank) going all in on private equities. However with the public equity market demanding profits again and with many Neobanks getting revenue without lending, the question we address today is whether Neobanks can persuade investors that they can generate enough profits without lending.
Editor note: If Fintech is in a bubble, thanks ironically to central bank money printing, the rush to finance Neobanks maybe to blame.
Part 1 discussed ways in which carriers are reorienting themselves with the long-term view on climate change. In this final Part 2, read about the differentiated approaches that leading insurtechs are adopting.
John Neal, CEO of Lloyds market opines, “Climate is the “ultimate systemic risk” and represents “the biggest single opportunity the insurance industry has ever seen,”. An extreme freeze in the U.K. during 2018 led to payouts for burst pipes totaling £194 million over three months. The same year, an extreme heatwave affected 10,000 homes in the U.K. with claim damages exceeding £64 million.
Editor note: Rintu shines a light on the role of “climate intelligence” ventures in solving a problem that impacts billions of humans on this earth.
Nearly two thirds (65%) of UK adults believe that maintaining a certain amount in savings for an emergency fund is the most worthwhile financial behaviour, according to new research from Marcus by Goldman Sachs.
The research, carried out among over 8,000 UK adults, is part of the 2021 worth and value survey from Marcus by Goldman Sachs – an annual snapshot of which financial, personal, and professional practices UK adults feel are worthwhile. It shows that the UK is still a nation of savers, with over two-fifths (41%) transferring a set amount of money to a savings account as soon as they’re paid.
Yet we’re increasingly seeing the value of alternatives to saving. Nearly a quarter (23%) of those surveyed plan to start investing or invest more in the next 12 months, increasing from just 15% the previous year. One reason for this might be that in a low interest, high inflation environment, we are beginning to see value in taking more risk in response to higher living costs.
Traditional and unconventional alternatives to saving
Some are even turning to new, unconventional assets to help them make the most of their money. More than one in ten existing investors (14%) claim to have invested in cryptocurrencies, and 11% plan to do so in the future.
Yet it seems that we are placing greater worth on traditional assets when choosing where to invest our money. In the last 12 months, 15% of investors had engaged in the new trend of investing in non-fungible tokens (NFTs), one-of-a-kind digital assets which sometimes take the form of memes. However, a higher proportion (22%) invested in art in the same period, suggesting that we still value Monets more highly than memes.
Precious metals such as gold and silver, a centuries-old method of investment, remain a popular choice. 14% of investors claim to have invested in precious metals, and 8% plan to do so in the future.
Worthwhile ways to manage money
The 2021 worth and value survey from Marcus by Goldman Sachs also reveals how our financial intentions aren’t always reflected in reality. While we consider some financial behaviours worthwhile, we don’t always actually do them. One in three (33%) say maximising the return on their savings is a worthwhile endeavour, for example, but only one in five (21%) actually do this. Similarly, while 35% believe sticking to a monthly spending budget is a worthwhile financial behaviour, just 26% actually do so.
“For the second year, our research has shown just how highly we value the practices of building an emergency fund, and regularly contributing to a savings pot, even in a low interest and high inflation environment” said Amanda Le Brocq, Head of Strategy for Marcus by Goldman Sachs in the UK.
“Yet we’re increasingly engaging with alternatives to saving. More people are investing their money in the stock market, probably in response to higher living costs and because some people have accumulated extra cash during recent lockdowns. It seems that more of us are seeing the benefits of balancing saving with investing, and the value of taking a risk for potential reward.”
Polly is a journalist, content creator and general opinion holder from North Wales. She has written for a number of publications, usually hovering around the topics of fintech, tech, lifestyle and body positivity.
According to a study, more than two-thirds (65%) of over 65s say they are more open to using financial services or payment methods that are quicker and more convenient for them. While so-called ‘boomers’ are often labelled as technology-shy, the research suggests fintech companies overlooking this demographic are missing out on a sizeable customer base.
Nick Adams, Director and Payments Experience Specialist at Modulr. Having worked for PayPal and IngenicoGroup before joining Modulr, Adams has a wealth of experience in customers spending habits and has been able to recognise the impact of the instant economy on different age demogrpahics.
Speaking to The FintechTimes, Adams explained why and how fintechs can capitlise on the older age demographic’s willingness to use new financial services:
The Digital Now is here and it’s underpinned by the Instant Economy – an economy of instant experiences, instant information and instant services in both consumer and business lives.
If Netflix, UberEats, and Getir have taught us anything, it’s that we’re a society that’s come to expect instant experiences. We can get whatever we like, whenever we like, wherever we like. For consumers, it’s great but it’s a tough gig for businesses.
To make matters worse, these same businesses are potentially ignoring a huge portion of the population and as a result are falling further behind in the market, getting lost in the competition, as well as failing to live up to the promise of the Instant Economy. But, the good news is that it is possible to not only meet the expectations of today’s customers, but exceed them, and it all starts with the payments, often the laggard technology at the heart of every customer experience (CX).
The Netflixification of Payments
A huge part of what makes the Instant Economy instant is fast payment infrastructure (not only the speed of the payment rail itself but across the entire network). Just as you choose a film on Netflix and expect to watch it straight away, customers now expect to be able to pay for things easily and for transactions to be completed (and notified) within a matter of minutes, not days. We call this the ‘Netflixification of Payments’. But, too many businesses see the payments experience (PX) as something their CX simply has to work around, rather than seeing the PX as an elevator of CX.
It’s clear that to survive in the Instant Economy, digital businesses must optimise their payments infrastructure to ensure this demand is met, because it’s not going away any time soon. Some 65% of people often don’t have cash either on them or at home, prompting them to buy things through digital means. Even if cash or card is an option, a significant minority consider themselves lazy enough to abandon one merchant in favour of a merchant with pre-saved on smartphone-led payment options. And, this isn’t just the younger generations, according to our new research.
Boomers like digital experiences too
So-called ‘boomers’ are often, unjustly, labelled as technology-shy and this has led to an entire demographic that has historically been neglected by fintech. According to the study, more than two-thirds (65%) of over 65s say they are open to using financial services or digital payment methods that are quicker and more convenient for them.
Also, around half (47%) say their expectations of payment experiences have grown as a result of more online shopping and leveraging digital services during the pandemic. And, nearly three-quarters (74%) of over 65s say they use bank transfer and payment apps to make instant payments to friends and family, placing this age group just marginally behind 25 to 44 year olds, 87% of whom use this payment method.
Statistics like these shouldn’t really be that surprising, after all technological advancements transcend age-barriers. If processes make things easier for people and are simple to use, no matter who they are or what their background, they’ll most likely use them. Ultimately, it comes down to the user experience.
Digital businesses need to account for everyone in the Instant Economy – if they don’t, they’ll lose out on a sizable portion of revenue and fall behind in the market.
We know digital payments are a key part of the Instant Economy – and the research proves that not only do older generations use them every day, they enjoy doing so, which makes them a source of untapped potential.
What’s the answer?
It’s all about the butterfly effect of payments.
Firms need to look at their back-end payments infrastructure, as this has massive knock-on effects to the customer experience in the front-end. It’s what we call the butterfly effect of payments; for example, moving from batch-based payment processing to single immediate Faster Payments, with instant notifications. This provides the business, say a lender or money app, with operational efficiency benefits in the backend, and a reassuring and instant experience in the front end. This is just one simple example; the butterfly effect of payments can be applied across a plethora of payment processes and features.
For businesses struggling with their payments process, the writing is on the wall. They should adopt technology like this in their back-end processes without haste.
Thrive in the Instant Economy
For businesses looking to thrive in the Instant Economy, recognising every demographic is vital. Businesses must then evaluate if their customer experience is Instant Economy compatible. And, addressing their current payment experience is usually the best place to start. Not only will this enable businesses to keep up in the Instant Economy, but it will also meet the rising demand from customers – young and old – for fast, frictionless services.
The only problem with entering the consumer credit market is that the consumers do the consuming part rather well but it you are the lender you have to get them to cough up for what they have consumed. It’s called the risk business and if you don’t fully understand it then you are not likely to prosper. Klarna’s founder shareholders however have done extremely well and their business is valued by the market at a staggering $ 46 billion. Klarna has just posted a £ 255 million loss for the first 9 months of 2021 largely because of the fact that some of their rapidly growing clutch of users don’t mind the Buy now part of their offering but are having more difficulty in doing the pay later bit. On top of this Klarna now has a raft of competitors for its business and regulators and left wing politicians are asking whether this business model is good for consumers. Well if it makes the wheels of commerce go around more power to it. What must be recognised is that BNPL has been around for ever and ultimately it is an expensive and risky business which means it has to be priced properly. All the fancy apps in the world will not help a lender that doesn’t get its money back.
The British Business Bank is owned by the UK state and its very laudable aim is to assist in the financing of small businesses. It is somewhat surprising therefore to find out that they failed to do the necessary due diligence on Lex Greensills “ supply chain finance “ operation. Mind you they are in good company. with Credit Suisse also not seeming to know what the Aussie was really up to. In any case as far as Britain is concerned it is just another few bob of the billions wasted annually by employees of the state from the NHS to the Home Office and back again. I have worked with state owned banks in the past and while their motives are never in question they can almost always be taken in by a sharp and plausible operator. What happens to people when they work for the government. Do they lose their marbles or just other peoples money?
It was a toss up whether I wrote about this latest piece of hyperbole from someone who obviously has some skin in the game and needs to beef up his reputation or the bombed out business model of Amigo Loans which is struggling to survive. I very much doubt whether Revolut is worth £ 24 billion but if people are prepared to buy its new issues at that valuation then I am quite glad to be left out. Nevertheless the chief executive of VC firm Molten Ventures thinks it is good value based on the fact that it has real customers and real revenues and that it can increase its margins. Apparently that is aIl there is to it. I wish them all the best of luck as well as all the other fledglings that all look remarkably similar in terms of their offerings and technology. I remember once having a letter from Goldman Sachs telling me that the company I was working for was worth 1,000 time current revenues. I didn’t believe them and I was right.
The future of payments is on everyone’s mind and experts all over the world are looking to understand what kind of technology will help shape that future. Zimpler is an Account-to-Account payment solution and here is why they think Open banking and Account-to-Account is here to stay.
“Two years ago we saw a strong movement towards Account-to-Account, and with PSD2 right around the corner, it made sense for us to work in that space. Banks and companies in other countries were moving in that direction with similar solutions. We saw it as the future of the payments industry, providing simplicity, security, and value to our customers,” says Annika Gunnarsson, product owner and part of Zimpler’s leadership team.
Zimpler’s pivot towards Account-to-Account payments is an interesting one. There were several reasons for the shift, one of them being the potential for a solution like that, but the main reason was that Zimpler saw the impact it would have on the future. Annika continues and points out that being agile and looking at what the future holds is key in an industry like Fintech.
“Being in such a fast-paced industry means always having one eye on the horizon, at all times, to see what’s bubbling up. Right now, open banking and Account-to-Account is where we want to be, but who knows what the next big tech will be? Having an agile approach to product development will help bridge that gap towards the future.”
It all comes down to ease of use for the end-user
Account-to-account payments enable companies to manage incoming and outgoing payments for their users, giving access to instant bank payments and payouts, as well as an automated compliance solution.
“We make payments as simple as possible. You don’t go out and buy something just because you want to hang out in the payment method’s interface, it’s just something that is necessary. So we focus on making the payments as efficient, reliable, and as fast as possible – so you don’t have to think about it.”
The Account-to-Account payments boom all comes down to simplicity and visibility, and that’s why Zimpler moved into the market. With bank payments, you’re able to see your accounts and the funds you have available, compared to a credit card that can get lost or stolen – both a security risk and an unnecessary hassle.
Simplicity is key for end-user expectations, but there is still information that needs to be in place to know who your customer is. With an Account-to-Account solution, that is handled in a few seconds, with just a couple of clicks for the end-user. Because that’s what today’s shoppers expect! Filling in forms and paperwork is a task better left in the past.
“Our processes for background checks on the user means less hassle for our customers, and there’s also a lower risk of the customer abandoning the purchase at checkout. Because we handle so many of the check boxes; it’s a frictionless process.”
Leveraging the end user’s expectation on speed and security
Zimpler offers a bank payment solution that manages KYC procedures in one flow, with a customisable layout, branded to fit their unique customers. The secret sauce? All the above. The speed of open banking, and the security it provides, combined with not being redirected from the cashier to an unknown payment flow.
Annika says: “There are a couple of players in the Account-to-Account area where we are, but what really makes us unique is how adaptive we are. We have a very flexible product that can be modified to fit our customer’s needs, something that most of our competitors cannot do.”
“When we develop our products, we always talk to our customers. It’s not important for us that our brand is most visible, but that our payment flow is fully adaptable to the customer’s brand. That kind of flexibility is unique in the market.”
Zimpler has grown spectacularly over the last few years, seeing a 300 per cent increase in revenue for 2020 compared to the previous year.
“One of the most important things is that we have a highly metrics-driven culture, which is also shown in the high conversion that we are seeing in the company and the product, which all brings value to the customer.”
Adaptability is the key
With Zimpler’s growth spurt showing no sign of slowing down, Annika believes that the strong movement towards online payments and the extreme push for digitalisation that we’ve seen over the past couple of years has helped fuel that momentum. “It’s a trend we can see will continue,” she says. “People expect transactions to go faster, and our solution is as fast as they get.”
Annika points out that adaptability is key for ease of use and for business development.
“As a financial institute, regulation is of course high on our agenda. Knowing the rules and regulations in each country that we operate in, or want to operate in the future, is crucial for us. But we also need to keep in mind how young our industry is and that we need to know that regulations, as well as technology, are evolving,” says Annika.
Zimpler has invested heavily in products and processes for anti-money laundering and customer knowledge. Annika explains this as another part of monitoring the development of the industry.
“Our own anti-money laundering tool is built to be adaptable. We can scale it so that we’ll be able to move fast when adding a new feature or moving into new countries. It’s also a way to keep the knowledge of regulation high within the company, and foster an innovative culture that we need as we continue to grow.”
She continues: “Banking infrastructure doesn’t affect us that much when building the product, but the user experience is definitely being changed from one bank to another. Usually, when we look at the bank infrastructure, we can see that the banks are kind of adapting towards each other, but it could also be different in a specific country between the banks, which also affects the way our solution looks and feels.”
The next move for open banking
With increasing demands coming from the end-user for speed and user-friendliness, Annika emphasises that open banking and Account-to-Account payments are the place to be.
“We are very light on our feet and we move fast,” says Annika and continues, “We need to keep our agile approach as we move forward. That and our amazing employees is what will enable us to keep our innovation speed and to continue to develop as new tech becomes available.
48% of fintechs’ data security is struggling to keep pace with innovation and digital transformation; a new report by Veritas Technologies has found.
In the accelerated switch to meet the ever-changing needs of a pandemic-conscious consumer, financial service organisations have been left in a state of heightened vulnerability and at an increased risk of ransomware and other data loss incidents.
As brought to light by Veritas Technologies’ Vulnerability Lag Report, this level of threat to the sector is expected to persist for another two years as organisations struggle to close the gap between the new technologies they have introduced to deal with the crisis, and the security measures required to protect them.
The Veritas Vulnerability Lag Report surveyed 2,050 IT executives from 19 countries, including 245 respondents from the financial services sector.
Unfortunately, the report has exposed the fact that companies in the financial services space were more likely to be struggling to keep pace with their security than those from most other sectors, with 48% of respondents stating that their data security was lagging behind their digital transformation deployments.
From the offset, this figure is concerning not only because the average across all industries was measured at 39%, but also because financial service providers typically handle very sensitive consumer information. The presence of this gap is therefore very concerning for people who frequently engage with these types of services, and depend on their security.
Eliminating The Vulnerability Lag
In order to close this gap in cybersecurity within the short span of 12 months, the report highlights how financial services organisations would need to spend, on average, an additional $2.61 million whilst hiring an additional 29 new members of IT staff.
This spending figure is 5% more than the average required across all sectors, which will come as disappointing news for IT leaders in the financial services sector, given the fact that they already typically spent 19% more than their peers on IT initiatives last year.
Only adding to the struggle, the report mentions how financial services companies were also less likely to have the funds required to take action against a security lag, as 43% of respondents stated that they lacked the funds to close all of their gaps, compared to 28% of energy companies and just 25% in the public sector.
Identifying the severe difference between digital acceleration and digital security, Veritas’ Director of UK Enterprise Sales David Wallace comments: “The financial services sector has undergone a huge digital acceleration in the last 18 months, but the pace of security rollouts to protect this innovation has lagged behind. As a result, there will be increased threats to vital data, especially from ransomware. Newly created backdoors will remain open to criminals, until companies within the financial services sector are able to catch up, which our data shows is expected to take two years.
“These organisations were especially stretched by the challenges of Covid, as more services moved online and new products were introduced at speed. And while, of course, they were right to prioritise continuity for customers and empowering the shift to remote working, the time has now come to redress the balance between rapid innovation and security.”
Expansion of Cloud Increases the Risk of Ransomware
82% of financial services respondents have implemented new cloud capabilities or expanded elements of their cloud infrastructure beyond their original plans because of the pandemic. It is these cloud environments that are most at risk while this vulnerability lag persists. With organisations having introduced an average of six new cloud services in the last twelve months alone, 54% of respondents said that they had gaps in their cloud protection strategy – more than any other area.
Responding to the global survey, three in five IT leaders at financial services organisations said that security risks have risen due to Covid-led digital transformation initiatives, with 44% specifying that the risk of ransomware attacks in particular had increased.
Business operations have already suffered due to the vulnerability. 89% of financial services stated that their organisation had experienced downtime in the last 12 months, not least because, on average, financial services were the victims of 3.22 ransomware attacks which caused disruption and downtime to their businesses – this is 32% higher than the average across all sectors.
“While the pressures that Covid-led digital transformation put on IT departments weren’t unique to the financial services sector, its position as a highly attractive target to hackers may have meant that the industry has felt them more acutely,” David continues. “With hackers beating at the door, and limited resources to push them back, it can feel like the IT team is between a rock and a hard place. But canny IT leaders are finding a third way: partnering with data protection providers that can minimise the admin burden of data protection through simplified tools that lever AI and machine learning. Taking this approach can help financial organisations to accelerate their security rollouts and stop their protection infrastructure lagging behind their digital transformation.”
FSS‘s (Financial Software and Systems) Unified Payment Interface (UPI) Suite will now support eVouchers; a move that is hoped to accelerate digital payments adoption amongst India’s financially underserved.
The addition of eVouchers to the FFS UPI is set to enable customers to transfer funds to any mobile number, for a specific purpose in real-time, regardless of whether the beneficiary has a bank account or not.
How the eVoucher Works
For low-income, unbanked customers, the eVoucher functions as a source of funds and serves as an entry point into the digital system.
The workings of the service are simple:
Customers can generate an eVoucher, by invoking the payment service provider’s UPI app or mobile banking app.
They must then specify the mobile details of the beneficiary, amount, and merchant, where the voucher can be redeemed.
At the backend, the FSS UPI system authorises the transaction and transmits the voucher to the beneficiary’s mobile device in the form of a QR or a SMS numeric string.
In India, the pandemic has accelerated the adoption of digital payments by approximately five to ten years. Underlining the growing demand for digital payment, India’s UPI processes a record 3.5 billion transactions monthly and represents the fastest growing payment rails in India.
Currently, the adoption of UPI services is restricted amongst customers of participating banks. But with the introduction of the eVoucher, payment service providers for banks will be able to exploit the ubiquity of mobile telephony to reach unbanked users.
India currently has around 1.1 billion active mobile users, of which 500 million are situated within rural areas. As it’s possible to send the eVouchers through SMS or QR codes, it eliminates the need for customers or merchants to invest in additional infrastructure.
With this in mind, it will allow payment service providers to start launching new customer-centric propositions including payroll services, supplier payments and gift vouchers, that are all able to exist and function through a mobile device alone.
Speaking on the launch, Jaishankar A L, CEO of FSS Paytech, said: “India’s UPI is globally recognised as the most advanced real-time payments infrastructure and accounts for an approximate 73% of total digital transaction volume within the country. The UPI platform is one of FSS’ flagship products and we are excited to launch the UPI eVoucher, enabling bank PSPs to bring new innovations that benefit multiple customer segments and strengthens India’s digital economy.”
The FSS UPI platform is trusted by leading bank PSPs in the country. The FSS UPI platform supports standard interfaces for integration with third-party fintech systems. In addition, FSS UPI mobile SDK provides third-party providers — banks, fintechs, retailers, wallet providers – a quick out-of-the-box integration capability, for embedding UPI payments into existing apps.