Love it or hate it, money is an important part of society. And our relationship with money – how we use it, who we trust to look after it, and how we as financial customers expect to be treated – is changing. In particular, four major trends will influence the financial sector over the next few years. Let’s take a look at these transformative trends.
Trend 1: Digital Currency
Money has well and truly gone digital. You can now pay for goods and services by simply tapping a screen through mobile apps or by scanning your phone in a store. In China, people can even pay with a smile on their face, using a facial recognition payment service “Smile to Pay”. These days, physical silver often doesn’t come into play.
Essentially, digital money refers to any form of money or payment that only exists electronically – and it can be as simple as a payment or money transfer that takes place online (usually facilitated by a traditional bank or credit card company) or as complex as an entire cryptocurrency like Bitcoin (which is usually found outside of traditional monetary institutions). Digital money can therefore involve credit cards, smartphones, apps, online banking, money transfer platforms and cryptocurrency platforms – but whatever transaction is made, the key factor is that no tangible money changes hands. This trend has been accelerated by the COVID-19 pandemic as individuals and businesses have become reluctant to handle physical cash, and contactless payments have surged.
In short, the trust that people have long placed in banks and traditional payment methods is increasingly placed in digital currency. And that’s giving rise to a whole host of new services that should challenge traditional financial service providers (more on that later). But before we get to that, let’s look at the broader implications of digital money.
Trend 2: The future of money – will physical money disappear?
The digitization of money forever changes our relationship to money, to the point that physical money could totally disappear. If this seems exaggerated, consider that more than 600 currencies disappeared over the past 30 years, and it is not unthinkable that others will completely disappear or be replaced by digital currencies. This also applies to major currencies. For example, the European Central Bank is already studying the introduction of a “digital euro.”
Another consequence of the digitization of money is that our personal data is increasingly intertwined with our money. In the future, even more of your personal data – for example, whether you are a student or a landlord – could be incorporated into your money and transactions. For example, payment systems could become largely invisible, and payment for goods and services could be made automatically based on your identity. This is something quite transformative, but it also comes with huge risks when it comes to data security and identity fraud.
Trend 3: The Rise of Financial Apps
This new wave of digital money is facilitated by mobile payment apps and “digital wallets” – typically app-based services that allow users to pay for things (for example, via contactless payments) and transfer money to others.
What’s really important about this trend is that many of these apps and services are not offered by traditional banks, but by tech giants and digital native startups, like Apple, Google, Samsung and PayPal. Fueled by data and AI capabilities, this new generation of fintech providers threatens the long-standing monopoly that banks and traditional financial service providers have over money and payments. In just one example, PayPal-owned Venmo processed $159 billion in payments in 2020, which is a 59% increase year over year. Imagine how long it would take a traditional bank to achieve this kind of customer growth. It’s amazing.
Apps are also starting to enter the world of unsecured lending, with services like Klarna, a buy-now, pay-later digital payment system popular with millennials. This will again take market share from the big banks and other lenders.
Trend 4: Consumer expectations for more personalized and intelligent services
The digitization of money is creating huge streams of data about what customers are actually doing with their money – and this information can be used to offer customers useful insights into their spending or even to sell other products and services. relevant financials in the future.
For example, independent UK bank Metro Bank has a smart tool called Insights, which analyzes customer spending patterns and makes predictions about whether a customer is likely to exceed their credit limit before their next paycheck or if an unexpected expense could push him into the red. . It’s the kind of personalized and bespoke service that bank customers increasingly expect in the 21st century.
This trend is so important that a PwC survey of technology in finance cited customer intelligence as the most important predictor of revenue growth and profitability. Ultimately, customers expect these smart services, and if traditional providers don’t offer them, you can be sure tech giants and digital native startups will step in to fill the void.
Learn more about these and other future trends in my new book, Business trends in practice: 25+ trends that are redefining organizations. Filled with real-world examples, it cuts through the hype to showcase key trends that will shape businesses of the future.