It’s hardly surprising that personal financial services haven’t been talked about much in the media for the last three years. The world was completely distracted by other matters – especially Big Tech, Big Pharma and Big Finance.
The digital transformation has experienced massive discussions in the context of banking and financial services. But the personal finance sector is undergoing a transformation of its own.
Technology has created a new wave of customers: Millennials and even younger customers are entering a new era of financing powered by mobile technology, offering so many more products and services than ever before.
Times of upheaval for personal finance
Anthony DiMarsico is managing director of bananas, a fully digital Belgian banking fintech that allows users to monitor the impact of their purchases on the planet. He points out that many more young people are now interested in investing – a space that used to be reserved for the older and upper echelons of the banking industry. Part of this shift is due to the increasing popularity of cryptocurrency.
He says: “Many people, especially younger people, are becoming increasingly interested in investing, especially investing in the world of digital currencies. Investing – and do-it-yourself investing in particular – has become more common since the first lockdown, possibly because people have had more time to do research and pursue their once ephemeral interests.”
But the current economic climate has also had an impact on how customers feel about their finances. “Inflation and the cost of living have continued to rise, reaching record levels, which has once again led people to seek additional sources of income through digital currencies. Additionally, there is a general distrust of the traditional banking system, largely due to the outdated banking environment and inability to provide fast and reliable payment options,” says DiMarsico.
New trends in personal finance
Green leavesFounder and Director of Green Wealth Planning, says the demand for integration of services that allow consumers to “realize” their financial potential and leverage both cash and crypto has caused tremendous disruption in the financial services market.
“We are seeing a rise in digital investments such as cryptocurrencies, with a large proportion of investors being Gen Z, which contradicts traditional investing age demographics,” she says.
“There’s been a wave of businesses going contactless-only, meaning we’re now seeing the biggest reduction in cash. However, this has also created the need for further cybersecurity; Many companies need to deploy end-to-end encryption to protect consumer data.”
She also points out that digital transformation has helped the market create business models that offer better value to consumers while generating pleasing profits. New trends such as virtual meetings via Zoom, Teams and Google Meets continue as many people prefer the flexible working option.
Confidence in the use of technology is also growing. “People are more confident in using apps to organize and manage their finances and are less dependent on high street banks to meet their financial needs, leading to the emergence of many budgeting and money management apps. We’re also likely to see a lot more newcomers in the future due to consumer demand,” says Green.
DiMarsico agrees with Green, pointing to the 17,000 cryptocurrency ATMs operating in America today. “It’s clear that the appetite is to use crypto the way there is cash, whether it’s to pay a bill, buy a meal, or use public transportation. The merging of cash and crypto is a trend that will become the future of payments,” he says. “Using a single access platform that bridges the gap between old and new payments provides a range of opportunities and allows users to learn how to buy and trade crypto.”
Political unrest has led to further disruption
“One of the key changes that has occurred in personal finance since the pandemic has been the accelerated digitization of risk and compliance functions,” said Stuart Esslemont, Global Head of Legal and Compliance at ZEDRA
He comments on the fact that the industry faces a very volatile and rapidly evolving environment (regulatory, political, social and criminal). This forces companies to be much more agile and able to deal with threats, uncertainties, data requests and data analysis, often with challenging deadlines.
Esslemont goes on to say that the recently introduced sanctions against Russia are changing the landscape. “Regulators and other oversight bodies have come to expect that companies will be able to extract data and make it available to them within a very challenging timeframe. Situations like this are time sensitive; The potential consequences of inaction can be significant and further emphasizes the need to invest in appropriate technology,” he says.
In terms of one solution, Esslemont suggests that organizations strive to be more data-driven and avoid having to piece it together from multiple sources. “Using the right digital tools linked to the core systems reduces the need for manual intervention and reduces the risk of manual error.”