A Look into the Future: What Will Financial Services Look Like in Five Years?
Banks used to be the first thing to come to mind when we thought about the term “financial services.” Today, however, we live in a world where new financial services emerge for every specific need, whether it is a simple online payment or something far more complicated. When we add the vast population that the banks do not reach, things become more intriguing. Thanks to FinTech companies and telcos, the unbanked and the underbanked are managing to adapt to a digital world where cash loses its physical form day by day. Yes, banks used to be the only option and everything else was a niche alternative, but soon it seems like the conventional banking systems as we know them will become the minority. That’s why banks are adapting to the new digital age even quicker than newcomers. In this article, we are going to share some predictions for the financial industry over the next five years.
The Big Challenge: Banking the Unbanked
One of the biggest problems in world development is the unbanked population—well, at least in the finance industry, it is. WorldBank states that 1.7 billion adults remain unbanked globally. Frankly, for the unbanked, becoming a bank customer is not a priority. They just need to get into the e-money ecosystem. Looking at the chart below, you can see that the underbanked population has already found a solution, and this answer seems to be new-age mobile technologies.
Source: Business Insider
Although banks are working hard to reach more people, 1.7 billion is still a tremendous number. Since banks are having such a challenging time reaching the unbanked, new-age financial services come into the picture: FinTech companies, telcos, and their comparably convenient financial solutions. If you want to learn more about the surprising development and rise of telcos in the finance industry, you can read our article on emerging technologies in financial services. In short, telcos and FinTech startups are banking the unbanked which eventually works for everyone; banks, consumers, and shareholders.
Understanding the Needs of Gen Z
The biggest topic in almost every industry for a couple of years is Generation Z. After underestimating millennials and paying the consequences, all the industry leaders are playing a different game this time. But again, unlike the millennial, Generation Z is incredibly unpredictable in their quick minds and behaviours. Still, if we know one thing about Gen Z it is that they want things easy, fast, and affordable. When you think about the complicated process of signing up as a bank customer, it is not Gen Z’s, or even the millennials’, cup of tea. The “do it for me” approach of the new generations is the leading motivation for start-ups like new-age financial solutions such as Venmo, Credit Karma, Mint, and Acorns. The FinTech businesses are aware of the fact that the young generation isn’t searching for a bank to save up their funds or apply for big loans. Instead, they want to perform quick transactions with what they already have and they don’t want to wait in lines to achieve that goal.
The Digital World Keeps Up with The Quick Pace Of Today’s Needs
That consumers of today need to do everything quickly remains one of the biggest challenges for the banking industry. Although banks are creating new solutions for the needs of the younger generation who are used to “on-demand,” new technologies like P2P lending, which eliminates banks from the process, are being used more and more every day and the giants of the industry are aware of this. Trillion-dollar companies like Facebook, Amazon, and Google are investing in the new-age financial platforms like Venmo, PayPal, and Square instead of decades-old traditional banks. Still, the two systems, both conventional and new age, are supporting each other in the next chapter for money. It is clear that we will greet the first fully cashless societies soon and, interestingly, the new system reliant on electronic money will be more accountable, transparent, and secure than the old one.
Banks are Secure, but E-Money is Transparent
Security used to be the number one concern for people when deciding where to put their money but, today, through immense advancements in technology like blockchain and mobile payment, everything is under control and secure. The next phase for banking, widely known as open banking, is a step forward for many aspects of the industry, and security is one of them. With the latest security and transparency measures taken by Europe, the digital age of money seems to be more secure than even highly guarded bank safes.
Digitalization Has a Great Effect on Transaction Costs
Although the end-user doesn’t notice this part of it, operating a business on a traditional banking system has huge transaction costs compared to digital solutions. Even for the end-user, most credit cards have subscription fees and making a simple cash transfer still costs money. On the digital front, the case is nearly the opposite and the reason is very clear: digital systems don’t need as much funding to operate. For a couple of years now, we have been seeing credit cards or bank accounts that offer less for almost free and that’s the only part of the developments that the industry is undergoing.
Building an E-Money Business is Easier Than Ever
Building a bank from scratch is extremely challenging and, considering the needs of the modern individual, it’s comparably unnecessary. When we look at recent trends in banking, we see new “branchless banking” start-ups. Our client, ViveBank, is a great example of the new-age branchless banking system, and there are more and more options relying on e-money which seems to dictate the future of financial services. Thanks to our tailor-made tools and platforms focusing on e-money, mobile financial solutions, and e-wallet systems, it is now easier and more affordable than ever to build a business that works through e-money. With our platforms, you can have whatever your business needs and the best part is that you don’t have to wait for months: it’s all ready. To learn more about our tailor-made platforms, you can visit our product pages.