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Mission: Possible – Banking the unbanked

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By Jovi Overo, managing director of BaaS at Unlimint

 

The Oxford English Dictionary defines psychology as ‘The scientific study of the mind and how it influences behaviour’. On the surface, a background in the discipline may not seem an obvious starting point considering where I find myself today – in fintech. Moving from psychology to finance and technology may seem like a leap, but in truth, it’s been incredibly helpful in dealing with the trials and tribulations of starting and subsequently doing business. The successful ability to influence a client when starting a business is key. Communication skills are central to this and by effectively communicating the benefits of doing business, the more powerful one will be at influencing client decisions. However, this is a two-way street. It is essential that clients listen, and, to do so you must build a rapport so they both like and, perhaps more importantly, trust you. Psychology has played a starring role in helping me to sharpen these skills which have so far served me well, particularly in a client-facing role.

While psychology has given me the foundation to grow professionally, I soon realised I was in the wrong field. This is why I moved to finance and banking. I spent the early part of my financial services career as co-founder of an investment advisory firm in the City of London. I then switched to fintech via an MBA (Master of Business Administration) at Imperial College Business School. For the last decade I have been particularly involved in the startup, payments, fintech, and BaaS (Banking as a Service) sectors.

My particular interest in BaaS means I can influence real change by developing and using fintech products. My current responsibility includes building solutions and the new BaaS division from the ground up. This allows me to develop my own creativity to bring change to the sector, help clients with all their financial needs, and meet my personal goal to make the world a more interesting and innovative place through fintech. I believe fintech makes banking, payments, and financial products better and that leads to making people’s lives a little easier, a little less stressful, and a little more inclusive.

I feel that now is a particularly exciting time for the growth of fintech as well as opportunities for entrepreneurs in the sector. In fact, the global fintech market will reach $225.1 billion by the year 2027, growing at a CAGR (Compound Annual Growth Rate) of 12.9 per cent. Growth of the market is predicted to be driven by the use of smartphones for services related to fintech and online transactions. Last year, approximately 44 per cent of payments were through a mobile app while 64 per cent of worldwide consumers utilised one or more fintech platforms.

For aspiring fintech entrepreneurs who are willing to take calculated risks and learn from mistakes and failures, the opportunities are immense. Belief in both what you are doing and trying to achieve is half the battle. Fintech, Web 3.0, Blockchain, and DLT (Distributed Ledger Technology) are all in their relative infancy. If history has taught us anything it’s that successful innovation drives progress. My tip for entrepreneurs who may be considering the fintech sector is to jump in with both feet!

I would certainly say that my passion for fintech is absolute, as it makes financial products, payments, and banking better. The inevitable result is that people’s lives are easier and less stressful.

In terms of industry trends, fintech is perfectly poised for the future. Further, I think that cryptocurrency, despite its volatility, is here for the long term. Innovative credit products and solutions are also a trend that is here to stay. There will never be a shortage of customers who wish to borrow conveniently and cheaply. This represents an enormous opportunity if employed correctly in tandem with adequate credit risk management.

For over a decade, the Global Findex Database has been a conclusive source of information in relation to accessing financial services including borrowing, payments, and savings. Its 2021 report revealed an increase in financial inclusion, but also found that 1.4 billion adults around the world still remain unbanked. In developing countries, figures for those with a bank account have increased from 42 to 71 per cent in the last ten years. In 2021, Morocco (71 per cent), Vietnam (69 per cent) and Egypt (67 per cent) were the countries with the highest number of unbanked populations.

I find some of these statistics both unacceptable and inexcusable. The countries where a lot of the unbanked reside have unreliable infrastructure, such as electricity for payments processing. In addition to this, bank branches are often absent in areas where unbanked people live, and too many financial services are poorly designed and difficult to use. Therefore, financial services provided by fintech will absolutely help bridge this gap by offering mobile solutions. The conundrum of the distance between bank branches and customers can therefore be solved.

Growing up, I was rich in love but I vowed to make it a mission of mine to ensure that children should not have to go through poverty. The largest group of people living in back breaking poverty are children and children of single parent households where that single parent is a woman. Women are the largest group to be unbanked and most likely to suffer from financial inclusion. This is where my passion drives me to address this problem. We don’t do nearly enough. We can do better, and we must do better, and we WILL do better. This is my mission.

 

Jovi Overo is managing director of BaaS at Unlimint, an advanced all-in-one fintech solution. It provides fast-growing innovative businesses with the ability to accept and make payments globally. The company’s main offices are located in London, Frankfurt, Singapore, São Paulo, Hong Kong and Mexico.

Banking

Will ‘Britcoin’ change the way we bank?

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The Treasury and Bank of England recently announced a state-backed digital pound is likely to be launched in the UK later this decade, following the popularity of cryptocurrencies. However, the ‘Britcoin’ will be backed by the central bank, ensuring the digital pound will be much less volatile than its sister, cryptocurrency. Could a digital pound backed by the central bank be the answer to utilising technological developments in the finance system for the better?

Ross Thompson, Accountancy and Finance Lecturer at Arden University, considers what we can expect from ‘Britcoin’, how this will impact consumers, businesses, and the economy, and whether ‘Britcoin’ could be the revolution to restore our confidence in the banking system.

Trust in our financial system hit an all-time low post the 2008 financial crash. Even ten years on from the collapse of Lehman Brothers, a survey found 66% of adults in Britain still don’t trust banks to work in the best interests of society.

This means there remains to be apprehension for people to sign up to and use a bank to help manage their money. The UK doesn’t seem to struggle too much in this arena, however, as according to the Financial Conduct Authority (FCA), most UK consumers (96%) have a current account from a bank or building society. Regardless, there is still a significant number of adults who do not have a bank account or are what is known as ‘unbanked’.

The lack of trust plays a big part here. More people want better control over their money and to cut out the middleman, hence why cryptocurrencies and blockchain became a tempting option, as it can potentially remove the need for banks for any transactions. However, the volatility of these currencies has been a cause for concern for many investors and regulators.

Blockchain and cryptocurrency are gaining more traction and are becoming more of a viable option for businesses, especially due to talks of regulations coming into fruition. This is especially true with cryptocurrency, with the government announcing crypto assets will be subject to FCA rules in line with the same high standards that other financial promotions such as stocks, shares, and insurance products are held to.

The “Britcoin” aims to solve the issues traditional Bitcoin presents. It would be backed by the central bank, which would ensure its stability and reduce its volatility, making it a more attractive option for investors and providing greater confidence in the stability of the financial system. Britcoin will be as stable as the inherent stability of the British economy and political system. It would also provide an opportunity for the UK to stay at the forefront of technological developments in the finance system – a system in which it can sometimes be slow to react.

One of the key benefits of a digital pound is that it would be much faster and more efficient than traditional banking systems. Transactions could be completed almost instantly, regardless of where the parties involved are located. This would make cross-border transactions much easier and could even help to boost international trade.

The Bank of England’s Governor, Andrew Bailey, stated: “a digital pound would provide a new way to pay, help businesses, maintain trust in money and better protect financial stability”, pointing toward the other advantage of a digital pound. It would offer more security as transactions would be recorded on a distributed ledger, which would make it much more difficult for hackers to tamper with the system. It would also provide greater transparency, as all transactions would be recorded on the ledger and could be easily traced if needed.

However, there are also some potential drawbacks. One concern is that it could lead to a reduction in the use of cash, which could have implications for those who do not have access to digital technologies or who prefer to use cash for privacy reasons. There are also concerns that a digital pound could be used for illicit activities, such as money laundering or terrorism financing. On top of this, more details are required in relation to the levels of personal account privacy; the potential to usher in ‘big brother’ banking systems is a growing a concern regarding state digital currencies.

Around 85 central banks are currently engaged in projects to create digital currencies, according to figures from the Bank for International Settlements. But as it stands, many feel there is probably little need for a digital pound; with a growing amount of people using their debit cards, phones and watches to fulfil the same function, a digital pound is deemed unnecessary. On top of this, many of the public fear that a government digital currency could potentially infringe on their privacy – despite the BoE stating the currency would be subject to rigorous standards of privacy and data protection.

And in countries where a digital currency has already been established, there has been little uptake – widely due to the lack of trust between central banks and citizens. It seems gaining users’ confidence should be the Bank’s first priority. The House of Lords economic affairs committee stated last year that a digital pound would pose “significant risks” such as state surveillance, financial instability as people convert bank deposits to CBDC during periods of economic stress, an increase in central bank power without sufficient scrutiny and could be exploited by hostile states and criminals; it is safe to say that the nation’s ‘Britcoin’ will need to be very well thought out.

It has the potential to revolutionize the finance system, however, and could provide significant benefits to investors and consumers alike. However, the potential risks and drawbacks must be carefully considered before any decision is made to launch such a currency. Having said that, if it is implemented correctly, a digital pound could be a powerful tool for utilising technological developments in the finance system for the better.

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Banking

Why the future is phygital

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By Eric Megret-Dorne, Head of Card Issuance Services and Service Operations at Giesecke + Devrient

 

Digital banking has become increasingly ingrained in people’s everyday lives. Today, 73% of people globally use online banking at least once a month. Traditional bricks-and-mortar banks, which have long relied on the in-person experience with customers, are now having to step up their offering. With new ways of working blurring the work-home boundary, banks must ensure a fast, seamless connection between face-to-face processes and virtual customer experiences.

However, this does not mean that physical and digital banking are in competition with each other. In fact, many continue to use physical bank cards, with 1.12 billion in circulation in 2021, which provides the basis for digital payments and offerings. As a result, the benefits of digitalisation should converge with the comfort of physical touchpoints to create a holistic, “phygital” experience.

The path to phygital

Banks are accelerating their digital transformation strategies to keep up with the fast pace of fintech innovations. To meet the changing needs and preferences of customers, the payment world is leveraging new technologies to create personalised experiences through a range of different channels.

While the digitalisation of banking has been underway for quite some time – particularly for younger generations – events such as the Covid-19 crisis forced banks and customers of all ages to use digital tools and processes to compensate for branch, office, and call centre closures. With branches worldwide typically operating at reduced capacity due to social distancing requirements, consumers embraced online banking to avoid both the virus and potentially long queues.

However, some consumers still enjoy physical touchpoints, meaning a digital-only approach won’t suit everyone.

Striking a balance

It’s all about options – consumers now want to freely switch between traditional and digital channels without being forced into one. But how can banks achieve this phygital balance? One way is to equip physical channels with digital capabilities, so that online tools can augment the physical experience. For example, personalised bank cards with a bespoke design can be activated digitally, offering customers an extra layer of convenience. Having to wait for a new PIN to arrive in the mail is a common bugbear for consumers, so bringing card activation processes into the digital ecosystem will ensure a more seamless experience.

Greater automation in the card issuance and activation process enables the benefits of digital to be integrated into the physical banking experience without being intrusive. For instance, self-service kiosks empower customers to print their own cards, reducing the time between acquisition and card issuance, while still allowing for in-branch expertise if needed.

The personal touch

Phygital strategies also give banks a range of valuable data insights that can help them better serve their customers. This includes data on purchasing behaviours and habits, which can then be utilised to improve banks’ offerings and unify the physical and digital brand experience. Using omnichannel data helps to build a hyperpersonalisation strategy to provide real-time services.

In this way, digital solutions help banks maximise their user experience. Whenever a consumer interact with a bank, it creates data and behaviours. With fragmented databases, legacy systems and real-time data created by interactions with third-party partners through Application Programming Interfaces (APIs), it is not always easy for banks to streamline this data from different sources. By understanding patterns in that data and behaviours, banks can tailor and personalise unique experiences for each and every user.

Where security meets innovation

With big data opportunities abound, banks should be mindful of their consumers’ security concerns. Customers are now demanding much more transparency when it comes to how information is stored and collected. At the same time, they still desire greater personalisation via digital methods. Therefore, any successful phygital strategy requires a robust digital security to ensure customers have the same peace of mind as when they complete physical transactions.

To close the gap between innovation and security, banks should utilise tokenised infrastructure, which ensures the safe provision of payment credentials and securing of customer payments across all touchpoints. This is particularly important as regulations such as PSD2 and SCA demand strong authentication requirements.

The use of a token greatly enhances the consumer experience. For example, it allows for card details to be automatically updated for subscription services upon the expiry of an existing one, avoiding any service disruption.  Multi-factor authentication can also ensure an additional layer of security, as it combines a password with verifiable human biometrics such as fingerprints or facial recognition.

Best of both worlds

Every consumer has unique preferences when it comes to banking. Therefore, banks must evolve by bringing both physical and virtual touchpoints into a ‘phygital’ world. Only a phygital approach can meet the needs of all end users – whether they favour an in-person experience, an online one, or a blend of the two. The holistic data insights, personalisation opportunities, and optimised security ensured at every touchpoint are also critical in building future-ready banks.

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