By Marcus Swanepoel, CEO of Luno
You’ve heard it said countless times already: 2020 has been a year like no other. The impact of COVID-19 on every aspect of modern day life has been unprecedented. Naturally, global economies and financial systems have been no exception. People have curtailed their spending, the job market is up and down, and there is a general feeling of uncertainty – no matter who you are, or where you are.
But what of 2021? Specifically, where does the happenings of this past year leave our financial system? Our banks, our currencies, our savings and investments are all under the spotlight like never before, with 2021 feeling like it could be a serious inflection point.
Will it bring more of the same, or will unprecedented times require unprecedented measures?
Confidence remains…for now
Despite the economic uncertainty brought about by the events of 2020, the data doesn’t paint as bleak of a picture as you might initially think. In fact, recent research* reveals that as many as 90% of people globally still trust their local high street bank to keep their money safe, only a slight decrease from data in 2019.
Those sentiments extend beyond the high street bank and into the likes of the House of Lords and the Senate. Despite the year being dominated by untried and untested monetary policy – with countries like the UK approaching negative interest rates for the first time – the general public are broadly positive toward their local government: overall, 58% of people are happy with their government’s handling of the economy in 2020, which is actually an increase of 3% from the previous year.
However, while their trust in others remains relatively intact, people’s security – or in this case, insecurity – around their own financial situation has taken an understandable hit, and that’s reflected in consumer spending.
In the UK, for example, there was a 25% decrease in consumer spending from Q1 to Q2. In real-terms, it’s a drop from £340bn at the beginning of the year, down to £254bn just a few months later. This 25% decrease in a half year is out of the ordinary, with consumer spending hitting a low not seen since 2002.
Unfortunately, the situation in the UK is reflected globally, and as such, there is a 13% increase from 2019 to 2020 in the people who view their economy performing ‘poorly’ or ‘very poorly’. This sentiment expands to currency, where 40% of people globally believe their local currency will decrease in value in 2021, with only 29% seeing an increase.
Can 2021 finally be bitcoin’s year?
It feels inevitable that consumer confidence in both the financial system and governments may begin to wane as the economic impact of COVID continues to take its toll, and fiscal policy continues to change to reflect this.
So, where does this leave us? While there is absolutely no quick-fix to eradicate the damage of COVID-19, a couple of key areas can be addressed by governments and financial institutions, particularly when it comes to savings and investments.
Despite aforementioned statistics pointing toward trust in the high street banks, it’s difficult to imagine a scenario where people will be pleased with low or negative interest rates.
While many often turn to stocks or gold as alternative methods of investing their money, these traditional safe-havens have also proven volatile this year, but more importantly, they haven’t proven as effective as one asset in particular: bitcoin.
Recently hitting its all-time high, it has, at the time of writing, outperformed assets like gold, oil, and even the stocks of some of the biggest companies on the planet, including Amazon, Apple, Facebook and Google.
In fact, despite gold increasing its value of just over 22% this year (at the time writing) it’s dwarfed by bitcoin, which has seen its value rise by as much as 170% over the same time period.
As a result, we’re seeing renowned investors such as American philanthropist Paul Tudor Jones, allocate between 1-2% of their portfolio in Bitcoin. He’s not alone either, with businesses such as MicroStrategy has moved 90% of its reserve balance into bitcoin.
While Bitcoin has yet to make its mark as a household product, it has with it momentum, and we predict that 2021 will see the currency proliferate and continue to be brought closer to the mainstream, growing in prominence as a new and alternative savings and investment method in what is looking to be a desperate year for savers.
Does more uncertainty lie ahead?
If 2020 was the year of uncertainty, there is hope that 2021 will bring with it a return to normality. But, amongst the return of the familiar, there is also the opportunity to embrace the new. In what will likely be a difficult financial period for people around the world, there is a clear opportunity for new money to aid consumers where the government and financial institutions can’t – or won’t.
Over a quarter of Brits now have an account with a digital-only bank
The number of Brits with a digital-only bank account has gone up by a percentage increase of 16%
Almost 1 in 6 Brits (17%) plan to open a digital bank account over the next 5 years
The top reason for opening an account was the convenience of banking online for the third year running
However, 16% of traditional banking customers who aren’t planning to switch said their bank had been helpful during the COVID pandemic
Currently over a quarter of Brits (27%) say they have at least one bank account with a digital-only bank, according to personal finance comparison site finder.com.
This is a percentage increase of 16% from last year when 23% of Brits said they had an account with a digital bank. It is also over 3 times the amount of Brits who had one in January 2019 (9%).
Finder’s 2019 research found that 24% of Brits intended to have a digital-only account by 2024. However with 27% now having an account, Brits have gone digital 3 years earlier than expected.
A further 17% of Brits intend to join them over the next 5 years, with 11% planning to do so over the next year. This could mean that 44% of Brits could have an account with a digital bank by 2026. If this percentage were applied to the UK adult population, it would equal almost 23 million people.
The top reason for opening an account continues to be convenience that digital-only banks provide, for the third year running (26%). The second most common reason was that users needed an additional account and setting up a digital account seemed to be the easiest option (20%). Customers also wanted to transfer money more easily (19%), making this the third biggest priority.
People wanting a trendy card is still driving signups as well, with 1 in 10 (10%) existing, or future, customers citing this as a reason to get an account.
Despite the increase in digital-only banking customers, the numbers who aren’t considering one have actually risen. Last year, 23% of respondents said they aren’t considering a digital-only bank account, but this has risen substantially to 42% in the latest survey.
This is likely a result of increased customer loyalty, 58% of those without a digital bank account said they felt as though their incumbent bank had treated them well and therefore had no desire to open a digital bank account. Additionally, 16% felt as though their incumbent bank had performed particularly well during the pandemic.
Over a third (36%) of those without a digital bank account said they had not decided to bank with digital providers because they preferred to be able to speak to someone in branch.
Digital banks are still most popular with younger generations, 46% of gen Z say they currently have a digital bank account, with a further 28% intending to get one over the next 5 years. This would mean that by 2026 just under three quarters of gen Z (73%) could have a digital bank account.
To see the research in full visit: https://www.finder.com/uk/digital-banking-adoption
Commenting on the findings, Matt Boyle, banking specialist at finder.com said:
“This research shows that digital-only banks are here to stay, with the number of users in the UK rising for 3 years straight. On top of this, Starling and Revolut announced this year that they have made a profit for the first time, really demonstrating that digital banks are starting to become a serious part of the banking furniture.
“The pandemic has also played a role in the rapid digitalisation of the banking industry, with those who had never experienced online banking having no other choice but to take their finances online. It seems that Brits are starting to realise the convenience that can come with digital banking and this is reflected in our research.”
Finder commissioned Censuswide on 6 to 8 January 2021 to carry out a nationally representative survey of adults aged 18+. A total of 1,671 people were questioned throughout Great Britain, with representative quotas for gender, age and region
The Impact of the Digital Economy on the Banking and Payments Sector
By Gerhard Oosthuizen, CTO Entersekt.
New banking regulations, digital consumers, the eradication of passwords, contactless technology – these are just some of the trends that will shape financial services and payments in 2021, writes Entersekt CTO, Gerhard Oosthuizen.
Since the outbreak of COVID-19, traditional businesses have been compelled to further undergo the digital transformation to meet the needs of a consumer base largely confined to their homes. Indeed, we estimate that there has been a 30% growth in the digital space. With this acceleration towards a digital world, banking, transacting and payment trends have and will continue to be redefined into 2021.
We have witnessed a rising number of digital first timers. That is, people signing up for online banking and e-commerce, whilst progressively shifting away from traditional channels. Businesses that have previously depended on walk-in stores and having a physical presence have also had to recognise that online transactions are now the new norm, and to adjust accordingly.
Whereas in the past, registering a customer for a service could take place in a shop, a booth or a branch, today it has become more important than ever to have a remote digital registration option available as well. Even working behaviour has changed considerably, with many businesses accommodating for remote working in the long term.
This is what sets the scene for 2021 – people expect to work from home as well as carry out their transactions from home.
Banking and Payment Trends in 2021
The use of contactless technology is undeniably growing, but on top of more people tapping with their cards, we are also seeing much more engagement with QR payments. A technology already frequently employed in Asia, we know QR codes can work. It would enable consumers to authenticate themselves when making a transaction without needing a PIN pad. More importantly, it allows consumers to gain complete control of their transactions from their own device and have an overall richer experience. Recognising this, we anticipate noteworthy developments in QR and NFC-enabled tap and go payments over the next year.
In light of FIDO (Fast Identity Online) and the ever-expanding network of FIDO-compliant solutions, we also expect the emergence of entirely passwordless systems. Organisations will likely begin enlisting customers by way of biometric authentication through devices and digital identities that already exist, such as banking apps. Long gone will be the days of having to remember numerous passwords, only to forget and reset them again. That is the idea anyway.
In 2021, there will probably be a pronounced adoption of delegated authentication as well, whereby
merchants as opposed to traditional issuing banks will take the reins of authenticating e-commerce payments. In this way, consumers will be offered a greatly improved online shopping experience with a simple and intuitive checkout that acts as an extension of the retail brand.
The Challenge of PSD2
While each of these transitions will undoubtedly introduce growing pains, PSD2 will be among the most challenging. Europe is already going through PSD2 now, implementing a number of regulations that is opening up competition in banking and electronic payment services. However, on the 1st of January 2021, these regulations will take a legal effect. At the end of the first quarter, so too will another set of regulations concerning 3-D authentication of card-not-present payments. Europe is simply not prepared to make this leap into “open banking”. As such, banks will face a tough year of struggles with regulators and competition from non-traditional quarters.
In fact, the process towards becoming PSD2-compliant is often arduous for banks and recoups hardly any additional revenue. Many banks see it as a competitive disadvantage as they are being forced to open up their systems and processes for the likes of Google, Facebook, Apple and many smaller niche fintech operations. Their valuable client data risks being taken by a challenger and used to on-board their accountholders.
Regardless of the commercial opportunities that open banking may provide, fraudsters will also endeavour to take advantage of this change and the weaknesses that will appear as systems open. With money moving faster, the faster it can be stolen too. We will likely see some reaction to this in 2021 as fraud returns to being a top priority for banks. Yet, whether through regulatory pressure or by market forces, open banking will become the new normal – and the world needs to prepare for this. Hopefully, many lessons will be learned from Europe’s experiences in 2021.
Next year is going to be about change – and managing that change without alienating already unsettled consumers. Organisations that have customer experience top of mind will emerge as winners, but they must nonetheless expect additional pressure from regulators, new competition, ever more digitally-demanding consumers, and no slowdown in technological innovation.
Protecting the digitally-excluded: biometric identification ensures access to payments in a cashless world
By Vince Graziani, CEO, IDEX Biometrics ASA
The events of this year have exacerbated a number of challenges for vulnerable members of our society. Fears over health have been compounded by the accelerated digitisation of activities in their daily lives, such as video calls with family, shopping online and mobile banking – activities they may have already been daunted by. Chief among these evolutions has been the pronounced lean away from the use of cash. With many not comfortable with the complexity and security of digital payments, banks must explore an alternative in the form of biometric identification.
COVID-19 and subsequent lockdown restrictions have not only made the handling of cash difficult, but even unsanitary. As a result, many retailers have either stated their preference for digital payments, or indeed forbidden the use of cash during transactions. As a result, the UK cash machine network, Link has reported a 55% drop in ATM usage over the course of 2020.
Meanwhile, in the US, a similar decline in cash has led to a rapid rise in digital payments and mobile payment apps, thanks to comparable regulations and an increase to the contact less payment limit of up to $250. According to recent research, 28% of US shoppers would avoid a retailer that doesn’t offer contactless payment options. That hesitation is causing a shift to digital payments, with the US mobile payment market expected to rise to $130.3 billion in 2020.
When the adoption of technology is accelerated so suddenly, it’s understandable that those vulnerable, older or even just reluctant and sceptical members of society aren’t thought about enough. The resultant fear of leaving vast swathes of people behind means we need a new touch-free payment solution that helps to comfortably and securely bridge their transition away from cash.
Who fears the transition, and why?
The idea of digital exclusion isn’t necessarily a new concern. In the UK, Which? has long been calling on the government to protect cash as a payment option, knowing that its eradication could negatively affect vulnerable members of our society.
Despite the concept of going cashless advancing, as many as 27% of UK consumers still operate only in cash, while across the Atlantic, 70% of US citizens regularly use cash. Looking globaly, research by the Global Index has explored the nascency of countries including India, Mexico, Nigeria and Pakistan in transitioning from cash to a digital banking system, finding that 1.7 billion adults around the world lack a bank account, while around 1 billion still pay their bills in cash.
Across the board, there is also a notable percentage of consumers who, while being banked, may struggle to maintain their financial independence. Old age or physical and mental health limitations can make the current transition difficult.
What if you can’t remember your PIN or your online banking password, or even your signature?
Banks must be aware that a wholesale veer away from cash isn’t going to suit or benefit all of their customers. They must therefore seek alternative options that still adhere to the trajectory towards touch-free payments, while addressing the above digital exclusion challenges that some will face during this transition.
A secure and convenient payment option
Rather than making payment transactions a game of memory or self-controlled security, the banking sector should look towards the benefits of biometric authentication. When incorporated into a bank card, fingerprint authentication offsets the need to put people under pressure to note down, secure, remember and then input various passwords, PINS or usernames. Instead, biometric authentication, through fingerprints, automatically and categorically links a person to their finances in the most understandable and seamless way possible.
For retailers it would ensure that the evolution away from cash can continue seamlessly; also meaning they’re less likely to lose out on an entire segment of the customer base. But, more importantly, for consumers, it provides a more safe, secure, immediate and convenient payment method that balances the positives between cash and digital payments.
It’s an ideal balance that relieves pressure on the digitally excluded. Vulnerable members of society will firstly be spared from a growing need to invest in expensive smartphones, or to learn complex digital banking features in order to carry out purchases.
Additionally, at a time where cash is potentially harmful to health, and equally at risk from a security perspective in the longer-term, they are able to make a safe step forward without any of the innovation headaches that might come with it.
The enrolment of biometric payment cards can even now take place remotely in people’s homes, making the transition even more seamless than the idea of extracting cash from ATMs.
Going beyond payments, biometric smart card solutions can also serve as the direct and unequivocal identification many would need to open a bank account, build credit and enhance their financial footprint, as seen in India’s Aadhaar biometric ID programme.
The solution to a prolific challenge
As we move away from cash and towards a world of digital payments, biometric payment cards provide the ideal balance of security, convenience and hygiene for touch-free transactions, without having to rely on expensive smartphones, mobile banking, or PINs.
Banks and payment providers must now embrace biometric payment cards to provide consumers with a secure and easily accessible means of touch-free payment. In doing so, financial exclusion will be one less critical factor to worry about as we transition to a cashless society.
Is MiFID II still fit for purpose in a post-COVID financial landscape?
By Martin Taylor, Deputy CEO and co-founder at Content Guru January 2nd, 2021 was the third anniversary of the implementation...
First of a kind Virtual Coffee Machine app with social meeting moments to support workforce wellbeing in a remote workplace
Powell Software’s first in a series of wellbeing technology innovations help remote employees socially connect with colleagues and keep the...
Top 5 Ways To Lose Your Video Files
There are lots of reasons why you can lose video files in your system or device. While some of these...
FSS and India Post Payments Bank AePS Partnership Advances Financial Inclusion in India
New Delhi, January 12th,2020: FSS (Financial Software and Systems), a leading global payment processor and provider of integrated payment products,...
Seven lessons from 2020
Rebeca Ehrnrooth, Equilibrium Capital and CEMS Alumni Association President Attending a New Year’s luncheon on 31 December 2019, we...
Over a quarter of Brits now have an account with a digital-only bank
The number of Brits with a digital-only bank account has gone up by a percentage increase of 16% Almost 1...
How fintech companies can facilitate continued growth
By Jackson Lee, VP Corporate Development from Colt Data Centre Services The fintech industry is rapidly growing and, in the...
BNP Paribas joins forces with Orange Business Services to deploy SD-WAN for 1,800 retail sites in France
Co-construction approach ensures business continuity during deployment BNP Paribas has chosen Orange Business Services to deploy an SD-WAN solution in...
2021 Predictions: Operational Resilience Takes Center Stage
Breaking down barriers between Risk and Business Continuity By Brian Molk, Fusion Risk Management What a year! Simply put, the global...
Five Workplace Culture Trends of 2021
5 January 2021 – 2020 – a year like no other – is responsible for driving organisational change, especially workplace...