Since its inception, banking has stayed relatively consistent, but with the current development in technology quickly advancing, financial services have been catching up.
Much of this is seen through the growth of fintech companies such as Revolut and N26, digital wallets like Apple Pay, and major tech companies like Facebook having their eye on Peer-to-Peer payments. With all that and regulations like PSD2 coming into play, consumers have never had such a range of choice and options available to them before.
The change has been rapid and the pandemic has helped in its acceleration. A recent payments report from UK Finance found that 54 per cent of adults now use mobile banking, while one-quarter of adults used mobile payments in 2020, showing how ubiquitous these services are now.
Yet while consumers have become used to these concepts, the core element will always be consumer trust. No matter what type of technology will be used, trust must be assured, otherwise a financial service has no chance of gaining and keeping clients.
“It’s a cliché to say we don’t need banks but need banking, but it’s true,” said Ronit Ghose, the global head of banking, fintech and digital assets for Citi Global Insights. “Banks will be relevant and needed as long as they’re providing value and convenience.”
Much of what we define as financial services has been broken up into smaller components such as instant payment, loans, budgeting, trading, buy now pay later models, cryptocurrency, and other services.
In short, whoever can provide the most value will benefit from this change and that’s based on what consumers need in their day-to-day lives. Ghose mentions that people don’t think about banking as a service, but in the context of what they need, whether it’s buying lunch, saving up for a holiday or buying a house.
To do that, there needs to be trust and reassurance. Even if it feels like the process of change is slower than expected, that’s more because all financial services have to work within regulations, depending on the territory they’re in.
Consumers are very much attracted to choice and ease of use, said Ghose, and a financial service that offers one or both will be very attractive to them.
In that case, fintech companies do have two advantages: the first is better technology to make things easier and more convenient, while the second is price point where the less it costs to transfer money or complete other services – or in some cases not cost the consumer anything – the better.
A similar transformation is happening across non-consumer or corporate banking with Dr Prag Sharma, head of Citi’s Global AI Centre of Excellence, based in Dublin, highlighting how its business clients are noticing technology-powered transformation more than ever.
“Business clients have shown an increased interest in the demand for more digital, real-time services,” he said. “At a broader level, we are seeing a convergence of consumer and corporate expectations – corporate clients want to have the same digital experience they are getting at a consumer level.”
Earlier this year, Citi established an Artificial Intelligence Centre of Excellence (AI CoE) in Dublin, enhancing its ability to operate within a continuously improving risk and control framework by transforming the way it works with data and new technologies.
“To address the changes we anticipate in the next few years, our Dublin office, through the AI Centre and the Innovation Lab, will focus on uniting Citi’s people, processes, data and technology in unexpected ways to unlock even greater value from every human action or machine event,” he said.
“Our Dublin office continues to be at the forefront of exploring these emerging trends. The focus of our innovation activities in Dublin has a three-pronged approach – supporting revenue growth, supporting the acceleration of digitisation and new emerging technologies, and client experience.”
Whatever the result of this financial transformation, Ghose sees a future where the type of financial services available will be as varied as the technology running them. There won’t be a clear winner from one area, but a restructuring of new and existing institutions.
“It’s not that fintech will win and banks won’t. Some fintechs will win, some banks will win and some big tech companies will win,” he said. “We’re in a new paradigm which is the information age, and just like the industrial age where you had banks, new banks are created for the information age or digital era.”