- Mike Rymanov, CEO, DSX
There is no doubt that fintech is bringing great changes to the financial institutions of the world. However, what about the impact that fintech can have on those who aren’t a part of traditional financial systems?
If we look at mobile technology, M-Pesa is easily the darling of the space. With mass uptake and mass mobile ownership on the African continent, M-Pesa, and the ability to pay businesses and people using mobile money has transformed entire economies. Whilst this affects millions of people, according to a World Bank and First Data study conducted in 2017, an estimated 1.7 billion people across the world remain without access to any formal financial accounts. 1.8 billion are also estimated to rely on semi-formal or completely informal systems, instead of banks, for their own financial services. These numbers are worrying.
A lack of access prevents not only full economic growth but also personal wellbeing. This is where blockchain and cryptocurrency could storm in and play a role where traditional banks have thus far failed.
The pedal to the metal
Let’s start by looking at blockchain. Blockchain reduces the time and expenses of financial transactions, can support biometric identification solutions, and can completely get rid of the dependence of single third-party authorities for trust in any system’s validity. Deloitte is right then, in saying that blockchain is an accelerator for financial inclusion – quite literally.
So what about the other great technology that is based on distributed ledger technology? What about cryptocurrency? These digital tokens are often used worldwide for investment purposes – making more money out of initial deposits, so how on earth could they help those who aren’t a part of the formal financial system?
In 2018, an academic, Jan Ohnesorge wrote that “a good replacement for access to a transaction account could be access to a universally accepted and secure cryptocurrency.” He even says that it could enable payments, offer the possibility to save money, and provide a gateway to other and more varied financial services. Crucially, this would not necessarily have to be powered by blockchain to work.
However, all this said, cryptocurrency still has a way to go when it comes to user-friendliness.
User-friendliness drives better uptake of anything, and can therefore demonstrate the benefits that cryptocurrencies can bring. One important one is a lack of access restrictions. Ohnesorge believes that this will increase the uptake of distributed ledger technologies as, in his mind and for many others, their biggest hindrance currently is ease of use. This also addresses a potential lack of trust in traditional financial systems that is currently hindering the uptake of use in markets that use M-Pesa for example. After all, everyone knows almost instinctively how to use a mobile phone, but not everyone instinctively knows how to use cryptocurrency.
So let’s take our inspiration from the mobile world. Abra, a mobile e-money wallet, enables crypto trading on the blockchain, in an easy and simple way. All that is needed is a smartphone with the app installed – this then enables sending and receiving funds – globally. Users do not need to understand what cryptocurrencies are, or how to use them. They don’t even need to know that the app uses cryptocurrencies. Abra means that anyone with a mobile phone can be connected to the global digital economy. For those in a completely unbanked situation, you don’t even need a bank account. These thin-file citizens can then immediately start building up their financial records file, which can pave the way towards a credit record being created. Not bad, right?
Blockchain in the real-world
So what about the real world? Are there examples where this is already working, or is it a pipedream conceived by technologists and blockchain evangelists? Could this actually, and I mean, really help the world’s unbanked? Well, I believe so, and I’m not the only one.
In the Philippines, as many as 70% of residents are unbanked. To overcome this obstacle to financial inclusion, Unionbank partnered with ConsenSys and a number of other banks and tech companies to create an Ethereum-based payment platform for rural banks. Initially designed to support domestic remittances, the programme aims to overcome the challenges of connectivity and lack of technological resources in rural areas. But it doesn’t stop there. Project i2i also wants to build the infrastructure needed to bring rural banks into the pre-existing and internationally connected financial system, along with their customers. There are also numerous other projects that are exploring the use of blockchain to bring about financial inclusion. One such example of a low-cost financial service based on the blockchain is Stellar, which IBM has embraced in order to launch its own Blockchain World Wire, a platform that enables real-time global payments. The Blockchain World Wire currently supports payments in 72 countries.
Blockchain, and the belief in blockchain has undoubtedly been impacted by the hype train. Financial startups touting it as a panacea, and any and every industry thinking of how it can be used to better their services has perhaps diluted the value of the technology to many.
However, applications of this technology in financial inclusion are just getting started, and look to be taking off with gusto. Blockchain holds real potential to bring everyone together on one ledger-driven financial system. It could, even, be the great leveller for all – elevating and levelling up those who haven’t been a part of the formal financial system before.
Blockchain and cryptocurrency technology’s potential goes beyond investing and fully traceable transactions. It can truly become a tech for good, enabling communities to bring themselves up to levels they may never have thought possible. A change in attitude is needed, but with it can come such a beneficial change, that we may remember the dark days of finance before blockchain with shock and horror. You never know, stranger things have happened!
WHY DIGITAL TRANSFORMATION IN FINANCIAL SERVICES IS ABOUT CULTURE FIRST, TECH SECOND
Stuart Templeton, Head of UK at Slack
In today’s world, there’s no such thing as a ‘non-tech fin’. Every financial services company needs to consider itself a fintech in order to bring about the innovation, speed, and transparency that customers expect, and that’s why most are pumping significant investment into their digital transformation efforts.
Part of the challenge faced by traditional incumbent banks is that they rely on legacy core systems that stifle the speed of change. These core systems were not built in an API first era. The good news of course is that the obligations of PSD2 and open banking have gone some way to facilitate future innovation.
While legacy banking platforms do continue to present a technical challenge, the human one can be even greater. Traditional institutions are often faced with the prospect of rebuilding their culture from scratch in the pursuit of becoming digital-first. Like many industries, the fundamental challenge is one of coordination: the creation and maintenance of alignment over time.
Couple this with the fact that the expectations of today’s workforce are changing, then companies in the industry have a real job on their hands. A growing percentage are digital natives, and millenials – who greatly value trust and transparency – make up the largest proportion of the workforce today. So how have businesses in the industry historically ingrained culture, and how does this need to change?
Old ways of working – Team A, and Team B
Traditionally, the culture within large financial organisations has been separated by two distinct teams: operations, and tech. They are driven by seemingly opposing forces – one by GANTT charts and lofty business goals, the other by agile software delivery and customer obsession. Often, the two don’t even speak the same language, let alone collaborate and share ideas. Of course there are digital projects, but they aren’t the embodiment of the business, and often tech teams find themselves battling to get buy-in from internal stakeholders who are somewhat removed from those that drive innovation.
Part of the problem is even the notion of having digital transformation projects – there is no such thing in today’s environment – as digital is an overarching movement, and financial services institutions must think of themselves as ‘digital factories’ in order to see a marked change. It is no longer enough to deliver tech updates both internally and externally once every few months, with speed diminished by layers of bureaucracy.
What needs to happen, then, is that these two business segments need to find a way to blend that helps the old incumbents forget their binary ideas of teamship from time gone by and instead let them come together to become one unit. Flattening the established hierarchy so that workers from across all lines of the business can communicate, share ideas and identify problems in real-time is, after all, the key to addressing the transformation gap. They need to think on their feet and iterate as they go: it’s agile thinking, but permeating outside of just the software delivery cycle.
Eating the elephant – one bite at a time
The solution, in theory, is relatively simple: companies need to break open the silos of information created by technologies like email and ensure anyone within a business has access to the knowledge and skills they need to make their projects a success. But of course, in practicality, this can present a seemingly insurmountable task.
Using technology to create an agile and transparent working environment that fosters collaboration is key for many financial services organisations that want to see real tangible results from their investments. Digital natives such as TransferWise and Starling Bank are getting this right by prioritising a decentralised business model, one that empowers collaborative working and knowledge sharing that in turn has a positive impact on employee satisfaction and retention.
They do this through collaboration hubs that provide a rich, permanent, searchable record of knowledge for everyone in the organisation.
Looking ahead: Team ‘us’
Predictions are very difficult, but in five years’ time we can expect to see a greatly altered perception of the financial services industry. We can expect that digital communications tools will continue to play an integral role in the evolution of their workforce culture, helping to bring the right people together internally within the business, as well as strengthening relationships externally with partners and customers alike.
Ultimately, in order to keep learning and improving, banks need to ask questions of themselves as competition and customer demand becomes more fierce: “Why are we doing this?” “What’s the benefit here, and who are we considering in the pursuit of this goal?”
To answer these things, a culture of collaboration and openness is key – underpinned, of course, by the tools that empower it.
DISPELLING BIOMETRIC MYTHS AND MISCONCEPTIONS
By Lina Andolf-Orup, Head of Marketing at Fingerprints
Gangsters cutting off enemies’ fingers to access secret locations and spies lifting fingerprints from martini glasses – the imagination of the entertainment world has been running wild ever since biometrics entered the scene.
Couple that with the limitations of some early biometric solutions from fifteen years ago, still anchored in the minds of many consumers, and you have the perfect recipe for an apprehensive and uncertain public.
Thawing lukewarm attitudes with a biometric touch
The biometrics industry has made great strides in the last few years – something particularly true for smartphones. Fingerprint authentication has replaced PINs and passwords as the most popular way to authenticate on mobile, with 70% of shipped smartphones now featuring biometrics.
And it doesn’t end there. Many adjacent markets are now eager to benefit from the secure and convenient authentication solutions that biometrics offer. Take the payments industry, for example, where biometrics payment cards are currently gathering real momentum.
However, some consumers are still uneasy about accepting biometrics. A recent study found that 56% of US and EU consumers are concerned about the switch to biometrics as it’s not enough understood to be trusted.
Although attitudes are shifting for the better, stats like this demonstrate there is still some work to do to disprove common biometric myths and showcase just how smart today’s solutions really are.
Dispel, adopt, repeat
The evolution in consumer biometrics in the last two decades has been phenomenal. And today’s solutions are far more advanced and safe than many may think.
To help bring an end to the myths, let’s expose some of the most common misconceptions around biometrics.
Myth: Biometric data is stored as images in easy-to-hack databases.
A leading myth about biometrics is that when a fingerprint is registered to a device, it is stored as an image of the actual fingerprint. This image can then be stolen and used across applications. In reality, the biometric data is stored as a template in binary code – put simply, encrypted 0s and 1s. Storing a mathematical representation rather than an image makes hacking considerably more challenging. In most consumer applications, this template is also not stored in a cloud-based location, its securely hosted in hardware on the device itself for example in the smartphone, in the payment card. Thus, it stays privately with its owner.
Myth: Fingerprints can be easily replicated to ‘trick’ devices.
The internet is full of articles and videos that claim it is possible to use materials from cello tape to gummy bears to craft fingerprint spoofs and access biometric systems. Although there may have been a time where gummy bear spoofing was the go-to party trick, todays’ consumer biometric authentication solutions have too many technological defences, such as improved image quality and matching algorithms, to simply ‘trick’ devices. Plus, on top this, the criminal needs to have access to the person’s device where this fingerprint is enrolled e.g. smartphone, payment card, before he/she notices and blocks it. This is not scalable nor common, in comparison to gaining access to someone’s PIN code or skimming a contactless card.
Myth: Physical change will prohibit access to my device.
Although our irises don’t change as we age, our fingerprints can and our faces will. Does that mean we have to update our biometric devices every few months to capture these changes? Not quite! Unless there are drastic, sudden changes, the ‘self-learning’ algorithms in modern-day biometric systems are able to keep up with our developing looks.
Who you gonna call? Mythbusters!
These are just some of the common biometric myths and misunderstandings perpetuating in consumer mindsets. Thankfully, though, while we’re working hard to rid the world of the myths, belief in the value of biometrics is only expected to grow. But as solutions expand and diversify, the myth-busting fight will continue.
Fingerprints has been a leader of innovation in biometrics for the last two decades. We’re proud of the expertise and R&D we’ve been able to pour into our biometrics solutions to deliver stronger security and a better user-experience. To learn more about the most common biometric misconceptions and the modern-day technology that allows us to dispel them, download our eBook here.
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