Jose A. Diaz – Chief Executive Officer for Zenus Bank
There remains considerable disparity across different geographic locations throughout the world in their access to financial services and even vital day-to-day services such as cross-border payments or fund transfers.
With Web 2.0 driving users towards bigger and better digital experiences – coupled with increasing globalization and the requirement to engage across borders – 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, 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, ranging from cryptocurrencies, Buy Now Pay Later (BNPL) 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.
One area that is growing at speed 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 per cent to 50 per cent across 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.
The growing number of fintech platforms in Latin America has been further fuelled by the increasing need for payment services not provided by traditional banks, rising demand for new embedded financial services, and regulatory changes that are enabling seamless cross-border banking.
Therefore, as the global south becomes more active in the world economy, companies working in developing countries need access to trusted and secure cross-border payment systems, while banks need to be able to transfer funds to clients they work with immediately across the globe. Similarly, from an individual perspective, there is significant demand for access to a global secure bank account, especially from employees in developing economies working for companies global who are sometimes waiting weeks to be paid through local banks.
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 organisations 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 organisations looking to provide this service instantaneously.
In response, international banking licences – the concept of globally-focused banks running on the same technology infrastructure across each country under one global licence – are being implemented to provide cross border banking instantly and seamlessly. 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 in 2023 and beyond – helping to address the recurring problem of transferring money overseas from a complex, expensive and time-consuming process to an instant routine task. These changes will also help complement the rise of embedded finance services such as Banking as a Service (BaaS), providing financial services to non-banking companies that look to adopt and implement these products on a global scale. The concept also has the potential to transform and democratise in developing nations, where it can take a few weeks for people to be paid through local banking channels.
2023 promises to be a re-defining year for the banking industry. 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.