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THE TIDAL WAVE OF CHANGE

By Theodora Lau and Bradley Leimer, in partnership with Money20/20 Europe

We are experiencing an unprecedented global shift in demographics. Our society is aging; we are living longer, healthier, and more productive lives. Life expectancy has improved significantly, and we have added decades of healthy living since the early 1900s. Along with longer lifespans, we are also staying employed longer than before. Soon, we will have five generations working alongside each other. Not only “when” or “how long” we are working has changed, “how” we are earning a living has changed as well. There are an increasing amount of contingent workers participating in the gig economy. There are also more women joining the workforce or even starting their own company than ever before. According to the Women’s Business Enterprise National Council (WBENC), there are 12.3 million women-owned businesses in the U.S., and women now own 4 out of every 10 businesses. Gone are the days of single-earning households with one steady paycheck. Adding to the increasingly complex picture is our varied financial obligations, from tuition for our children to financial caregiving for our parents. How do our financial institutions innovate to meet the needs of our evolving world? One could perhaps take a page of the playbook from the East.

The story of Grab

Grab started as a ride hailing company in 2012 in Singapore. Since that time, it has evolved to Southeast Asia’s leading super app, fueled by US $1.46 billion in fresh funding from the Softbank Vision Fund. In addition to transportation, it now has a robust food delivery business, and an ever-expanding financial services platform, with the goal of becoming the region’s largest merchant network, insurtech policy provider, and fintech lender. Their newly launched financial services offerings branded “Grow with Grab” will include payment and microlending, aimed especially at the 9 million micro-entrepreneurs that Grab serves today.

Elsewhere in the U.S., various fintech companies are enabling companies to pay workers instantly for completed work. For example, Caviar couriers using the Square Cash can access funds immediately after completing delivery. Marketplaces using Stripe Connect can send Instant Payouts to sellers or service providers. Meanwhile, Uber and GoBank have partnered to provide Uber drivers instant access to accrued funds via GoBank checking accounts and debit cards; and Earnin sends a workers’ earnings instantly to their bank accounts – instead of having to wait. All of these seemingly small innovations are important, especially for many consumers today, where bi-monthly pay cycles do not line up with their bills, leading them to turn to credit card debt and overdraft fees to bridge the gap.

The multistage life

But the story doesn’t stop at payroll. If we are living longer and healthier lives, what do we do with those extra years? Traditional pension schemes and retirement plans assume a direct path of education, career, and a hard stop at age 65. But a longer lifespan will enable us not only to work longer, but also take more risks and try out new things – re-invent, re-skill ourselves, perhaps even start a new company. In fact, over half of all new entrepreneurs in the U.S. are over the age of 45, according to the Kauffman Foundation. And as much as 85% of jobs that will be available in 2030 do not exist yet for today’s graduates – it is never too late to disrupt ourselves. 50 is indeed becoming the new 30.

Given this new paradigm, is retirement still relevant? Or should we retire the traditional notion of retirement, and re-think how we should manage and grow our savings? As Professor Andrew Scott wrote in his best-selling book 100 Year Life: “The simple truth is that if you live for longer then you will need more money. This means either saving more or working for longer.” But with relatively low rate of savings and investments, what can financial services companies do to help nudge consumers into healthier financial habits?

Part of this lies in to understanding the current longevity trend. While aging is universal, how we age is not homogeneous – and we can no longer segment individuals and their needs by age. A 50-year old today is vastly different than a 50-year old twenty years ago. A 50-year old in China is also different than a 50-year old in Europe or the US. Their financial needs, aspirations, and obligations are also likely different. Perhaps the best way to serve them is to better understand where they are in their life stage. Someone putting children through college will likely have very different needs than someone as an empty-nester – though they could be of the same biological age. Likewise, an entrepreneur starting up a new business will have different needs than those still in traditional corporate or manufacturing roles. In an increasingly connected world where we are leaving digital breadcrumbs of nearly every aspect of our lives, emerging technologies such as data analytics and artificial intelligence could prove useful in not only providing contextual insights based on habits, but also guidance or even decisions made automatically on our behalf.

Just as much as we need to become more flexible in the new era, it is paramount that financial services innovate and adapt to the changing needs of our society. With longer lifespan and longer earning power, we could afford to take more financial risks than ever before; saving smaller amounts will have a much larger impact on our lives with this extended time. We need to be more fluid than ever when it comes to managing our assets, expecting more up and down cycles, and matching our financial tools to help us plan for a greater frequency of multi-generation households and the growing complexity of our financial obligations.

It is more important than ever for us to invest in our future selves – and to take advantage of the extra time that we have. The question is, will financial institutions guide us through this new normal, or will we increasingly rely on fintech and big tech platforms to meet our financial needs? After all, the future of aging should not be a story of survival – but one of living.

Join us at Money20/20 Europe this June in Amsterdam, as we dive further into the game-changing stories and trends, driving forward the global Financial Services, Payments and FinTech community. Find out more about the Money20/20 Agenda and Stories by clicking on the links below.

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Top 10

WHY INDONESIA IS THE WORLD’S NEXT DIGITAL PAYMENTS BATTLEGROUND

Kelvin Phua, Global Head of Payment Networks at PPRO

 

The COVID-19 outbreak has seen the e-commerce sector surge. Despite economic uncertainty, consumers around the world are turning to the internet for the goods and services that they previously would have looked for in-store. In APAC, this has meant that some emerging markets have accelerated their adoption of digital services; the growth that was projected to take years has only taken months.

One notable example of this is Indonesia. According to a recent survey, Indonesia’s e-commerce sector is expecting 50% year-on-year growth with its value set to reach US$35 billion in 2020, up from $23 billion in 2019. What’s more, 30% of the country’s growing e-commerce market is new to online marketplaces and 40% intend to keep using e-commerce after the effects of the pandemic lessen.

With this upward trend has come a reliance on digital payments, and both public and private sectors have responded accordingly. Recently, the Indonesian central bank announced that all mobile payment providers were to replace QR codes with the standardised QRIS (Indonesian Standard QR code), providing a single integrated platform for all transactions made using QR codes across multiple e-wallet providers. On the private sector front, LinkAja has launched an online shopping solution to overhaul traditional marketplaces throughout Jakarta by enabling users to pay for goods using an app with the products delivered straight to their door.

For e-commerce and digital payment providers, these examples are good indicators that the time is right to go after a share of this market.

 

Understanding the playing field

Indonesia possesses many of the key characteristics that are critical to a market’s adoption of digital payments. With a smartphone penetration rate of 60%, well above the region’s average of 51%[1], and having witnessed its middle class grow from 7% to 20% of the population over the last 15 years, it comes as no surprise that Indonesia’s internet economy has more than quadrupled in size since 2015.

Currently, there are 37 local payment methods (LPMs)[2] in Indonesia, with GoPay, Doku, OVO, Dana, and LinkAja some of the frontrunners in the battle to claim a slice of the payments pie. This number is expected to grow as Alipay formalises its entry into Indonesia in partnership with Bank Mandiri and Bank Rakyat Indonesia, joining WeChat Pay which was officially granted a licence to operate in the country this January in collaboration with CIMB Niaga.

The growing number of players jumping on board with digital transactions bodes well for the Government’s National Non-Cash Movement launched in 2014. Go-Jek’s recent funding round and Facebook’s plans to build an e-commerce ecosystem around WhatsApp will help accelerate the adoption of digital payments for millions of SMEs in Indonesia, with businesses already using the popular messaging service to interact with their customers. Similarly, PayPal’s arrangement with Go-Jek will see the latter’s users use GoPay at PayPal merchants globally.

With the influx of foreign payment services and investment catering to higher consumer demand while creating the digital infrastructure needed to facilitate higher payment volumes, Indonesia is shaping up to be Southeast Asia’s next digital payments battleground. But what does this actually mean for businesses and consumers there?

 

Navigating a fragmented payments landscape

With all this consolidation and market movement, payment providers are innovating quickly to strengthen and enrich their offerings by partnering with others to develop their own unique payment ecosystems. Initially, these new partnerships will result in greater efficiencies when it comes to connecting consumers and businesses through one platform. But the fundamental pain point remains; the development of multiple payment ecosystems will continue to create the dilemma of choice. Consolidation in the truest sense of the word is yet to be achieved, and the payments landscape in Indonesia remains highly fragmented.

Since Indonesia loosened investment rules in 2016, foreign e-commerce players such as Amazon and Alibaba have entered the domestic market, competing against homegrown firms such as Tokopedia and Bukalapak. This has provided consumers with access to a wider variety of goods at more competitive prices.

To keep up with consumer preferences in Southeast Asia’s largest economy, merchants and payment service providers would need to evolve – by delivering a customer-centric experience where consumers are able to pay with the local payment method they prefer and trust.

In the long term, businesses should refrain from the drawing of battle lines in Indonesia’s fragmented payments landscape and create a payment ecosystem that takes into account payment preferences of the local consumers. Those who seek to enter multiple markets through one payments platform-as-a-service will be the ones most likely to succeed in capturing the lion’s share of the e-commerce market.

 

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Technology

ARTIFICIAL INTELLIGENCE AND FUTURE OF TECHNOLOGY

Ashish Jain, CEO, Future FX

 

Artificial Intelligence refers to machine intelligence that is programmed to think like humans and mimic their actions. For example while writing this article, I am not actually typing it but dictating it out using the microphone and the text is being typed by Microsoft Word itself.

The ideal characteristic of artificial intelligence is to rationalize and take actions to achieve a specified goal.

As technology advances the previous methods of artificial intelligence are taken for granted as new necessities are conjured. For example the computer was one of the most iconic invention of artificial intelligence but now it is considered as mandatory.

Artificial intelligence is continuously evolving and has to evolve. Machines are made in a way that they understand mathematics, linguistic, psychology and many more other terms that are related to human mind.

Artificial intelligence is used in many sectors for example the medical sector. It is used to test drugs and medicines.

We have applications and games which includes chess where the computer plays against us this is also a feature of artificial intelligence. Similarly self driving cars are also an invention of artificial intelligence. These have to be designed very intelligently.

This can also be used in the financial industry to trace and flag activities in banking and finance such as unusual debit card activity or usage and large deposits.

This also helps to estimate the demand supply and prices of the estimates and that makes trading easier.

Earlier, we had to pay a visit to bank on order to deposit a cheque. Then we updated to ATM/Debit Cards and now you can be identified by your retina. Many different sectors have also adapted this method to make actions it more convenient and safe.

Some more examples of artificial intelligence are iPhone’s Siri, Google’s Smart Assistant, Amazon’s Alexa, Google Maps, Ride- sharing apps like Uber and Ola, diseases mapping, Automated investing, virtual travel booking, social media monitoring, inter team chat tool, NLP tools, etc.

Artificial intelligence is all around us and playing an active role in our daily lives. Every time we open our Facebook newsfeed, do a Google search, get a product recommendation from Amazon or book a trip online, we are using it immensely.

In the coming years, computers might match or even exceed human intelligence and capabilities on tasks such as decision- making, reasoning and learning, analytics and pattern recognition, visual acuity, speech recognition and language translation.

Smart systems in commodities, vehicles, day to day use objects will save time and effort offering us a more customized and comfortable future.

It will help the medical sector hugely in upgrading the medicines and treatments, inventing new ones which haven’t been found yet and making everyone’s lives more safer and healthier. A large number of data can be collected from person to person about their health and nutrition and thus changes can be made in the lifestyle.

Artificial intelligence will bring changes in the educational system making it more revolutionary and advanced.

Overall, every factor has advantages and disadvantages and artificial intelligence has it’s lot too. Considering all the advantages artificial intelligence will also affect the human decision making power, analyzing and rational thinking, lifestyle etc. It will make people lazier and will affect their creativity. It can also lead to unemployment due to increase in usage of machines.

Like everything has a balance, artificial intelligence needs to be balanced too so that we can enjoy it’s benefits without suffering the negatives.

 

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