Mushegh Tovmasyan- Chairman of Zenus Bank
Banking personalization has been a huge focus over the past decade, driving richer digital experiences for users. Alongside greater personalization, continuous globalization and the need to engage across physical borders has meant that global financial inclusion has gained even greater importance. This is not uniform across the globe, however.
Useful and affordable financial services across transactions, payments, and savings – through digital banking – are taken for granted in developed economies, but they are by no means the norm in developing countries. While efforts to improve cross-border payments are underway, there are still huge strides to be made to facilitate a transformation of the banking sector in this area. And in the meantime? The reality is that consumers and businesses in those developing jurisdictions are struggling to be a part of the global economy.
The capabilities of the banking sector have been dramatically expanded by the acceleration of challenger and neo banks, as well as services offered by fintech providers. As a result, the range of services that the banking sector offers has expanded considerably. What’s more, new interactive service models are now being offered by companies across a wide array of sectors outside traditional banking. For instance, it has become rather common for retail, entertainment, and airline companies to provide products such as Buy Now Pay Later services, embedded financial lending services, and cryptocurrencies.
Notably, the pandemic advanced the trend towards working remotely, which further emphasized the need to be able to provide cross-border services instantly in order to work efficiently with global partners. It also exposed the need for organizations to be able to pay a geographically dispersed workforce, as well as expand global supply chains into new markets. One of the markets that is seeing the most growth in this post-pandemic world is Latin America.
Here, the figures speak for themselves – the region saw investment rise from $4.1bn in 2020 to $15.7bn in 2021, almost a 4x year-on-year growth. An important reason for this development is the fact that Latin America serves as a perfect launch pad for fintech startups. Since banks across the region have historically only served affluent individuals due to much lower competition and restrictive credit requirements, this left a significant segment of the population un- or underbanked. For some countries, this number can be as high as 30%-50%. The user experience is also generally poor, even for those with credit cards or local bank accounts. This is the result of a lack of investment in the tech infrastructure.
As such, across Latin America, there is significant demand for access to a global, secure bank account. For example, employees based in developing economies working for foreign companies can wait weeks to be paid through local banks. For small businesses aiming to engage with new markets and to gain access to a strong currency, the subpar local banking services means a loss of revenue and constrained opportunity. Therefore, providing a secure, scalable, and transparent international bank account will be vital to creating financial inclusion for millions of people and organizations who are still lacking these essential products.
The banking sector now recognizes this need and is investing heavily in products that can offer seamless international payment services. These investments will prove crucial in bringing millions of new players into the global economy. If the future is to be prosperous for as many people as possible, then we must ensure that capital flows efficiently across borders.
International banking licenses have come into play in response. The concept of globally-focused banks, which use the same tech infrastructure to serve many jurisdictions under one global license is now gaining significant traction. This means offering banking services not only to high- and ultra-high-net-worth individuals but to everyone, anywhere in the world. This is especially true for emerging economies where the need for these services is the greatest.
By providing constant access to funds and to a global account, this fundamentally changes the banking capabilities for those in developing countries. This helps to address the recurring problem of transferring money overseas, which goes from being a laborious process to a routine, instantaneous task. This is the main area of focus that Zenus is investing in, and we are working with strategic partners to build scalability for these services for customers across the globe.
This growing trend of greater access to funds and a global account will be one of the defining changes across the global banking sector. Additionally, here at Zenus we are also working diligently to create a platform that will enable fintechs and other consume-oriented brands to integrate financial services into their offering. We believe leveraging Banking-as-a-Service capabilities will prove key to many organizations’ ability to expand their reach globally and explore new revenue verticals. This means that UK fintechs, for example, could service Latin American or US clients, which would significantly increase the accessibility of cross-border banking.
Following significant technological developments in the sector, coupled with high demand for these services and investment, simple and seamless cross-border payments could help transform the global banking system. This will not only provide new standards for the global banking sector but will ensure customers can access quality banking services instantly from anywhere on the planet.
