Mushegh Tovmasyan – Founder of Zenus Bank

Despite the transformative changes we have seen in the banking sector over the last decade, there remains a considerable disparity in accessing financial services from country to country and even vital day-to-day services such as cross-border payments or funds transfers.

A strong emphasis on banking personalization has driven us towards bigger and better digital experiences. Meanwhile, continuous globalization and the requirement to engage across borders means the need for global financial inclusion where individual customers, as well as businesses, have the same sort of access to useful and affordable financial services across transactions, payments, and savings, through digital banking is more apparent than ever.

The rise of challenger and neo banks, as well as fintech providers, has transformed the capabilities of the banking sector, which can now offer a vast array of services to customers. These include new interactive service models, from cryptocurrencies, Buy Now Pay Later products and embedded financial lending services from companies across various sectors – ranging from supermarkets to global sports companies – outside of the banking industry. Meanwhile, the pandemic exacerbated the trend towards completely digital companies that operate remotely and need to be able to provide cross-border services instantly to work with other globally-orientated partners, pay staff anywhere across the world and expand global supply chains into new geographic markets.

Mush

One area that is growing rapidly is Latin America, where fintech investment has accelerated significantly. The region saw growth of nearly four times, rising from $4.1 billion in 2020 to $15.7 billion in 2021. Latin America serves as a perfect breeding ground for fintech start-ups. Primarily because banks across the region have, historically, only served affluent individuals due to a lack of competition and stringent credit requirements. A large portion of the overall population is still underbanked, ranging from 30 percent to 50 percent in major countries. Even for those with credit cards or bank accounts with local banks, the user experience is generally poor, while many banks have failed to invest in technological infrastructure and improve the digital experience.

Clearly, across the region, there is significant demand for access to a global secure bank account for a range of needs. For employees in developing economies working for companies who currently wait weeks to be paid through local banks. For small businesses looking to access and collaborate with new markets, and to provide access to a strong currency – the U.S. dollar – for those in developing countries with less stable economies, transforming the capabilities of international digital banking. This trend has only accelerated as remote working has become the new norm and companies employ staff all over the world. We at Zenus, therefore, believe offering a secure, transparent and scalable international bank will be vital for banks to provide financial inclusion to millions of people, businesses and organizations still without these essential products.

Consequently, the banking sector is now investing heavily in products that can offer secure, transparent and scalable international payment services that will be vital for providing financial inclusion to millions of people, businesses and organizations operating in developing economies. Cross-border banking, for example, and the ability to transfer money across bank accounts from different countries, provide a unique challenge that many banks are looking to address. While money has always been transferred across borders, the increase in cross-border flows of both capital and citizens in today’s world has resulted in more financial organizations looking to provide this service instantaneously.

In response, international banking licenses – the concept of globally-focused banks running on the same technology infrastructure across each country under one global license – are now being repurposed by banks to not just service High Net-worth and ultra wealthy customers but for anybody, anywhere in the world, especially in emerging countries where the need exists the most.

Banking accounts can be opened remotely and accessed from anywhere, providing customers with a global footprint, constant access to their funds and providing access to a global account for those in developing countries with less stable economies.

At Zenus, we believe this growing trend will be one of the defining changes across the global banking sector – helping to address the recurring problem of transferring money overseas from a complex, expensive and time-consuming process to an instant routine task – and is the main area we are investing and working with strategic partners to help scale these services for customers across the globe. By also offering our banking infrastructure via API’s and White Label services, we enable prominent Brands and fintech providers to expand their global reach and explore new revenue verticals. UK fintechs, for example, could service US clients or Latin American clients helping cross-border banking to become accessible everywhere.

These changes will also help complement the rise of embedded finance services such as Banking as a Service (BaaS), providing financial services to any company, no matter the sector, that is looking to adopt and implement these products on a global scale. The concept also has the potential to transform and democratize in developing nations, where it can take a few weeks for people to be paid through local banking channels.

That is our mission at Zenus – to make it easier and safe for clients to access, send, receive and store money in the U.S. from anywhere globally. Our international license gives customers constant access to their funds without requiring U.S. residency or citizenship.

The demand for simple and seamless cross-border payments could help transform the global banking system. Not only by providing new standards for the global banking sector but by ensuring customers can have access to an international bank instantly and no matter where they are based.

Michel Roig, President of Payment and Access, Fingerprints

Often, new technologies are lauded as the death of existing ones. This has been undoubtedly true in some areas. Think audio cassettes and CDs, Betamax and VHS, fax machines and email… and a host of other examples. Sometimes the market and product vendors can influence this decision but, mostly, consumers decide which technologies win based on the value they bring to their everyday lives.

Often though, new technologies coexist with, and complement, existing ones. This is very much the case in the payments ecosystem. The advent of mobile payments had many claiming the death of the humble payment card. In a world still using cheques and with significant innovation happening across both mobile and card payments, the card is not going anywhere for the foreseeable future because consumers choose different payment methods based on different situations and preferences.

But, as new payment methods are made available to consumers, and each keeps evolving, the payments ecosystem needs to ensure that the security, convenience and user experience is consistent. This blog will trace the adoption of card and mobile payments, discuss the need for strong authentication and highlight the role biometrics is playing in enabling unified experiences for consumers.

Card & mobile payment adoption

There is still a mix of how consumers make in-store payments today. For example, Fingerprints research found that more than 70% of consumers elect to use their cards most often, compared to less than 5% choosing their smartphones.

But mobile contactless is growing. Mobile payment experience enabling the same (or better!) convenience of traditional card payments, with additional security and more opportunities for richer experienced and value added services like loyalty and discount integration. Because of this, for example, last year the U.S. saw in-store grow by 29%.

Additionally, we can consider in-app and online mobile payments. Allied Market Research reports the global in-app purchasing market size was valued at $76.43 billion in 2019 and is projected to reach $340.76 billion by 2027, growing at a CAGR (compound annual growth rate) of 19.8% from 2020 to 2027.

Safety first, right?

It’s clear that contactless transactions are growing, but safety is still a concern for a lot of consumers, particularly with cards.

Consumers around the world have come to love the convenience of contactless. While 77% of consumers use contactless regularly, half are worried about the lack of security if their card is lost or stolen and around a quarter are confused about spending limits.

And even as contactless use was rocketing, fraud was a cause for concern. According to UK Finance’s latest Annual Fraud Report, lost and stolen card fraud incidents increased by 1% between 2020-21, despite this being a time when normal high-street shopping habits were drastically altered due to pandemic restrictions. Worryingly, the same report highlighted that when pandemic restrictions were eased in late 2021, contactless fraud on payment cards and devices went up 20%.

Historically, the authentication methods for card, mobile and online payments have been diverse and inconsistent. Biometrics is helping to unify, strengthen and simplify the payment authentication process, no matter where or how consumers choose to pay.

Biometrics bringing benefits

One innovation helping consumers – that increasingly demand more convenient, secure and hygienic payment experiences – is the addition of biometrics to strengthen and unify authentication.

After over a decade of integrations, mobile is the most mature and established market for consumer biometrics, and we now estimate that more than 80% of smartphones sold now incorporate some form of biometric sensor.

Recently Fingerprints celebrated that its own sensors have been integrated in more than 650 mobile device models globally, in nine out of the top ten smartphone OEM brands. But this is by no means a static market.

Crucially, continued adoption is being driven by innovation. Ongoing R&D on the biometric sensors and software are enabling biometrics to support broader product development and innovative use cases. This is supporting ongoing mobile adoption and diversification into other devices like payment cards.

Ongoing momentum is down to biometrics’ fundamental benefits; the technology’s ability to strengthen security and authentication while maintaining or even improving the user experience by removing the need to enter PINs and passwords.

Unifying the authentication UX

On top of these core benefits, biometrics can also help banks and card manufacturers to harmonize the payment authentication experience. Consumers are already used to unlocking their smartphone with a fingerprint sensor. With mobile payments and banking apps on the rise, biometric authentication is now increasingly common in consumer finance.  By offering biometric technology in payments cards, banks can offer their customers the same convenience and security they are used to from their mobile and in-app transactions.

Not all consumers pay for items in the same way, so the important factor is to offer trusted options that help a wide range of users. The addition of more secure authentication to cards is therefore a logical development in order to cater to the requirements of the less tech-savvy individuals all the way through to the digital natives.

Evolution not revolution

So, it is not a question of new payment technologies replacing existing ones. Technology evolves, yes. But cards are not static and, for many, will continue to be the default method of payment. For others card, mobile contactless, online, in-app and others all have a time and a place.

Moving forward, banks and other issuers can support customers by adding strong authentication to the ‘tap’ of contactless to bring it in line with mobile and in-app payments. Alongside added protection reducing fraud risks and lost revenue, it provides the convenience of avoiding contactless limits – and the confusion they can bring – altogether.

With the clear need for security that does not compromise convenience, the desire among consumers for the technology, and the readiness of the technology for mass rollout, the coming years look exciting for biometrics and its role in smarter payment experiences.