Jacqueline Junke, UK Market Lead at Appinio
Throughout the pandemic, people have turned to many fads including banana bread, Tiger King and Clubhouse. One lockdown trend, however, that isn’t set to be a fad is crypto. Over the past year and a half, digital currencies like Bitcoin and Dogecoin have turned from the passions of a few fanatics to a mainstream phenomenon. In fact, Dogecoin’s stock skyrocketed 800% earlier this year, despite starting out as a joke.
Moreover, even though they have been around since 2014, NFTs or non-fungible tokens have suddenly become a status symbol for those looking to own or show off their digital art. A recent report found that the NFT market quadrupled in 2020, with the total value of transactions increasing by 299 per cent year-on-year to more than $250 million.
However, despite the growth in cryptocurrency and NFTs during the pandemic, questions about the future of Bitcoin and other digital currencies still remain. For example, we at global market research platform Appinio found in a survey of 1000 Brits that over a third (36%) of those that invest admit to not fully understanding how cryptocurrencies work. We also found that only one in four (25%) feel able to easily explain it to other people.
For brands thinking of entering the NFT and cryptocurrency market, the lack of understanding of blockchain and crypto might seem shocking, as people should know what they are spending their hard-earned cash on. However, our research found that word of mouth is key to the sudden growth in crypto over the pandemic. Family and friends are the first port of call with 54% of 16-24 year-olds stating this followed by 41% of 55-65 year-olds.
While people can rely on the questionable advice of a family member or a friend for investment, brands thinking of launching an altcoin or an NFT can’t be as flippant. Lack of information around the dangers can land brands in hot water with regulators and politicians. For example, online brokerage RobinHood has faced increased scrutiny from politicians in Washington following the surge of crypto traders on the platform.
The sustainability issue
Another question surrounding the future of cryptocurrencies is their lack of sustainability. For instance, coins such as Bitcoin have come under increased pressure in recent months following stories around the environmentally damaging process of mining coins.
Bitcoin mining is a deeply energy-intensive process, in which a computer solves a complex series of algorithms to verify the legitimacy of a single digital coin. While crypto mining could take place on an average computer in 2009, the increase in Bitcoin over the past decade has made the algorithms harder to solve. In fact, the process has become so energy inducing that a study from the University of New Mexico has found that the amount of electricity used to mine Bitcoin is more than the energy output of entire countries.
However, despite the stories around crypto being environmentally damaging, consumers are still trading coins. Our data found that despite 2 in 3 Brits (62%) saying that sustainability is very important to them, only 40% of those who invest in cryptocurrencies say that sustainability is a priority. In fact, just under half (42%) of investors admit they don’t know how sustainable or socially responsible their portfolio is.
Our research also found an interesting contrast between age groups: half of all 35-44 year-olds feel sustainability is important when it comes to financial investments. This drops to 35% of 45-54 year-olds and only 23% of 55-65 year-olds rank it as important.
For brands, Bitcoin’s environmental issues can damage their reputation. Take, for example, Tesla. The electric vehicle powerhouse was in hot water in February, when its CEO, Elon Musk, decided to allow people to purchase vehicles with Bitcoin. With the company also pledging to tackle climate change through electric vehicles, the decision by Musk generated a considerable backlash from politicians and the media.
While cryptocurrency experts attempt to answer sustainability and regulatory questions around Bitcoin and other coins, brands should be wary of getting involved in crypto and NFTs. Our research shows that there is a growing appetite from consumers for all things crypto and that the technology has moved beyond a simple lockdown fad. However, there are dangers in getting embroiled in cryptocurrency scandals and brands that are deciding whenever to invest in NFTs and Bitcoin need to weigh up the rewards against potential backlashes.
Bringing Automation to Banking
Ron Benegbi, Founder & CEO, Uplinq Financial Technologies
Automation is everywhere you look these days; from supermarkets to warehouses to automobiles. This prominent trend shows no sign of abating anytime soon. However, some sectors remain behind others when it comes to adopting automated technologies. Banking is one such segment, but there’s now evidence to suggest that this could be about to change.
What do we mean by automation?
There are a lot of ways to define automation, but broadly the term applies to any technological application where human input is minimized through design. Over the years, automation has evolved from a basic level, which took simple tasks and automated them, all the way to advanced automation powered by Artificial Intelligence (AI). In general, automated solutions work to increase productivity and efficiency within businesses and often result in a reduction in costs associated with human capital.
Why has the banking sector been slow to adopt automation?
The banking sector has been built on a number of long-standing, tried and tested processes and protocols, which have been continually fortified and refined over time. This is one explanation as to why the sector has been so slow in adopting new, automated methods within its operations. Additionally, many major financial institutions have spent decades building their own internal legacy computer systems, which are often incompatible with modern automated solutions.
When combined, these two issues have caused a significant lag in the banking sector with regards to the adoption of automated technologies. This lag has created a market opportunity that a number of fintech providers have been able to exploit in recent years. Offering a more responsive and tech-first user experience, many fintech providers are leveraging the power of automation to better meet the banking needs of their customers. However, there is still time for the banking sector to start bridging this gap.
Does automation have a place in the banking sector?
The opportunity for automation to play a role within banking can be transformational.
To achieve this, it’s important that legacy organizations begin to learn from their more tech-savvy, smaller counterparts. If used effectively, automated financial solutions can greatly improve the experience of banking customers, both on a personal and business level. So, what exactly does this change look like, and how far away are we from seeing it become a reality?
A good place to start is the small business credit lending process, where not much has changed since the 1980’s. Over that period, the world has greatly transformed, but the methods used to assess credit worthiness have remained somewhat static. For the most part, banks assess data related to businesses’ accounting and banking records and from credit scores. For many businesses, especially the newer and less established ones, this antiquated approach is having a detrimental effect. In fact, it’s often cited as a contributor to the huge funding gap between SMBs and their larger counterparts.
How can automation benefit the banking sector?
By adopting more automated technologies, lenders in the banking sector can begin to assess more comprehensive information when making credit decisions. Notably, new methods exist, which enable additional data sets to be evaluated, in order to build a more accurate financial depiction of a business’ overall position. This data can come from sources like external market attributes, economic indicators, demographic data and exogenous shocks.
By leveraging additional data sets through new methods of financial automation, banks are now in a position to respond more effectively to small businesses, including those in emerging and evolving markets where there is a lack of conventional sources of information.
With more ways to access funding, facilitated by alternative data and automated processes, small business owners can improve their operational efficiencies and accelerate their growth efforts. In doing so, legacy oriented financial institutions can now better equip themselves in protecting against new, nimbler tech-based disruptors.
MYTH BUSTING THE ROLE OF OPEN SOURCE IN FINANCIAL SERVICES
Nigel Abbott, Regional Director North EMEA, GitHub
There is no denying the financial services (FS) industry is under pressure to innovate. Not only have customer and consumer expectations for digital experiences surged in recent years, but the emergence of nimble and ambitious fintechs have disrupted the market. Yet, despite striving for innovation being table stakes across the industry, FS organisations inevitably face familiar hurdles that slow their progress, including concerns surrounding security, compliance, and the ability to act fast.
Open source is increasingly seen as a route to drive innovation and create new value. The FS sector’s utilisation of open source and the transformative role it can play is accelerating – on paper, at least. According to the recent Fintech Open Source Foundation’s (FINOS) 2021 State of Open Source in Financial Services survey, as many as 80 percent of FS leaders said that innovation, reduced time-to-market and total cost of ownership are factors for FS businesses to consume open source.
But the reality is these positive adoption figures don’t tell the whole story. The survey also revealed that 75 percent of FS technology leaders said their businesses are either not “open source first”, or that they did not know if they were. Tellingly, less than one in ten (eight per cent) said that their business has put in place policies to encourage open source contribution.
The statistics point towards disparity between uptake of open source and the ability to use it to its full potential. But why?
For me, it comes down to some common myths about the role of open source that need demystifying:
Myth #1: There are limits to the innovation that open source can deliver
This could not be further from the truth. All enterprises, including FS companies, rely on open source software to build the best software for their customers, improve infrastructure, and unlock the potential of their engineering teams. Nationwide, for example, has completely redesigned its DevOps processes to respond faster to market changes and keep pace with customer expectations to remain relevant. The impact is transformative when they actively embrace it and participate fully in the open source community, creating a win-win situation for end-users.
Myth #2: Data can be shared without consent
Quite the opposite. Open source does not require FS businesses to share all their secrets and give away their competitive advantage. Instead, taking an “innersource” approach allows financial institutions to take the skills of developers who are accustomed to using open source tools and brings these inside the company firewall, providing a secure internal platform for working collaboratively on projects.
Myth #3: Open source is not secure
The most common misconception is that higher security risks are associated with code being openly available to anyone who uses it. But the open concept is, in fact, one of the biggest security strengths of open source. This is because of the collaborative nature of how code is built. The open source community has a shared responsibility for developing and maintaining secure code, and there is a vast global pool of developers identifying and fixing security issues. Supported by the right tools and processes, open source makes it easier for developers to code securely throughout the entire software development lifecycle, reducing the amount of time and financial investment in delivering secure products. Research from Red Hat found that security is regarded as a top benefit for enterprises using open source.
Myth #4: The open source community lacks finance sector contributors
This is untrue. Financial enterprises of all shapes and sizes are prominent participants in the open-source community and lead by example, sharing meaningful code contributions. Challenger banks and institutions such as Goldman Sachs contribute to open source initiatives via FINOS. By opening their code and ideas, FS companies can share lessons and support the whole community – helping them deliver better services and more value to their customers. And crucially, they are advancing a community that they can systematically tap into and benefit from.
Open source is already delivering innovation in the FS sector. But the bottom line is that there is so much extra value it can bring. Unlocking the full potential of open source to effect change does not just require buying DevOps tools. Open source requires organisation-wide understanding and support, a culture of collaboration and a progressive DevOps and governance process to thrive. Only then can it deliver its true value and accelerate innovation.
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