It’s no surprise that over the past three years, personal finance services haven’t been talked about much in the media. The world has been entirely distracted by other issues, especially those involving big tech, big pharma and big finance.
Digital transformation has been widely discussed in the context of banking and financial services. But the personal finance industry has undergone its own transformation.
Technology has created a new wave of customers: Millennials and even younger customers are embracing a new era of financing, controlled via mobile technology and offering much more in terms of products and services than ever before.
A time of change for personal finances
Anthony DiMarsico is the CEO of Banxe, 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 now have an interest in investing – a space that was once reserved for the older and upper echelons of banking. Part of this change is due to the growing popularity of cryptocurrency.
He says, “Many people, especially young people, have become more interested in investing, especially in the world of digital currencies. Investments – and DIY investments, in particular – have become more common since the first lockdown, perhaps because it gave people more time to research and pursue what were once ephemeral interests.
But the current economic climate has also had an impact on customers’ attitude towards their finances. “Inflation and the cost of living have continued to rise to record highs, once again prompting people to seek additional sources of income through digital currencies. Additionally, there is a general distrust of the traditional banking system, mainly due to the outdated banking environment and the inability to provide fast and reliable payment options,” says DiMarsico.
New trends in personal finance
Makala Green, Founder and Director of Green Wealth Planning, says the demand for integrating services that allow consumers to “unlock” their financial potential and use both cash and crypto has caused huge disruption in the financial services market.
“We are seeing an increase in digital investing, like cryptocurrency, with a huge proportion of Gen Z investors, which contradicts the traditional age demographic of investing,” she says.
“There has been an increase in the number of businesses opting for contactless payments only, which means we are currently experiencing the biggest reduction in cash. However, this has also led to the need for additional cybersecurity; many companies need to provide end-to-end encryption to keep consumer data secure.”
She also points out that digital transformation has helped the market develop business models that provide better value to consumers while earning pleasant profits. New trends such as virtual meetings via Zoom, Teams and Google Meets continue to take hold as many people prefer the option of flexible working.
There is also growing confidence in the use of technology. “People are more confident in using apps to organize and manage their finances and are less reliant on high street banks to meet their financial needs, leading to an increase in 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 and points to the 17,000 cryptocurrency ATMs in operation in America today. “Clearly the appetite for using crypto is there the same way cash is there, 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 an assortment of possibilities and enables users to learn how to buy and trade crypto.”
Political unrest has caused further disruption
“One of the most significant changes that has happened in personal finance since the pandemic has been the accelerated digitization of risk and compliance functions,” says Stuart Esslemont, global head of legal and compliance at ZEDRA.
He comments that the industry faces a very volatile and rapidly changing environment (regulatory, political, social and criminal). This forces companies to be much more agile and able to deal with threats, uncertainties, data demands and data analysis, often with difficult deadlines.
Esslemont goes on to say that the recent sanctions introduced against Russia are changing the landscape. “Regulators and other oversight bodies expected companies to be able to extract and deliver data to them in very difficult time frames. Situations like these are urgent; the potential consequences of inaction can be significant and further underscores the need to invest in appropriate technology,” he says.
In terms of a solution, Esslemont suggests companies strive to be more data-driven and seek to avoid having to assemble it from multiple sources. “Deploying the right digital tools, linked to central systems, will reduce the need for manual interventions and decrease the risk of manual error.”
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