What are the critical changes and challenges facing the financial industry, and how can financial industry leaders prepare for the road ahead? As EVP, Managing Director of Finance+ at Bounteous, this is a key These are the main questions asked by senior executives. Money 20/20 is a good indicator of future trends as it provides a sense of the amount of money fueling the sector by the vast number of participating fintech companies.
Not surprisingly, the COVID-19 pandemic has brought new customer expectations and new digital trends within the financial industry. Traditional players have to adapt quickly to stay competitive.
Fast forward to 2022 and incumbent financial institutions still struggle to maintain consumer confidence and meet changing consumer demands. As a result, he identified three pivotal trends for 2023. The move to open banking, evolving payment platforms, and banking as a service (BaaS).
open banking
With Money 20/20 Speaker Rohit Chopra Director, Consumer Financial Protection Bureau (CFPB), announced that new rules and regulations regarding financial data rights will be introduced. This reveals that some changes are to be expected in financial institutions.
Although not specifically mentioned, proposed rules from the CFPB would accelerate the move to open banking in the US. What exactly is open banking?
Open banking is a technology-enabled approach to financial services that utilizes aggregated and authenticated data connected via APIs, increasing the ways consumers consume financial data while making transactions more secure. The new standard requires banks to share data with approved third parties.
Open banking allows customers to more easily leave financial institutions if they have a bad experience, leading to increased market competition. Approved third parties can increase access to customer data through APIs they must use.
With greater transparency and convenience, Open Banking strives for customer empowerment. This effort reduces security and privacy concerns and eliminates screen scraping and reliance on his three-digit credit score.
Comment from Chopra Clarified that the CFPB will issue a report in the first quarter of 2023 to inform the proposed rule, which is expected to be issued in the second half of 2023. It will be finalized and will be implemented in 2024.
This will be a major topic in 2023 as it will change the way financial institutions operate.
For financial leaders – this effort will ignite competitiveness and reinforce the need to continuously drive innovation. The battlefield for experience and solutions will intensify as the playing field is leveled between incumbents and challengers. This includes being where your customers are with respect to your platform, removing friction from the customer journey, judiciously incorporating data from other providers into your experience, and leveraging democratized data to shape your underwriting standards. This includes the need to improve and build innovative products. If customers could easily take their account history to a new provider, it could revolutionize how businesses compete within financial services.
payment
Another important theme is payments.according to PwCThe global scale of cashless payments is expected to grow by more than 80% between 2020 and 2025, from about 1 trillion transactions in 2020, to reach about 1.9 trillion in 2025, according to . Decrease in in-person payment methodsit is no surprise that digital payments will grow rapidly in a highly competitive market.
Financial services and non-financial services companies are expanding their service offerings by adopting an as-a-service model. These models allow standard companies to have a large number of functions and reach more customers.
Topics trending under the model as a service include payment as a service (PaaS) and cards as a service (CaaS). PaaS and CaaS provide platforms that enable companies to offer sophisticated payment products and card solutions through the cloud without spending significant time and money on in-house development. Some examples of companies leading transformational change in the CaaS space include: zetaWith over 15 million cards issued, Zeta provides next-generation credit cards to banks and fintechs around the world.Another important example here is transfer matea global payments disruptor that enables fast and easy cross-border payments from business to business.
Payment tech companies are undoubtedly changing and evolving rapidly, but they have also left their mark on other major industries.
For example, the CEO and founder of PrimaHealth Credit spoke at Money 20/20 about the need for Pay Now (BNPL) access to healthcare. PrimaHealth Credits Leverages advanced credit analytics, democratizes access to healthcare, and offers affordable monthly payment options to help more patients get the care they need. Our mission is to bring more care to more people through pitfall-free fundraising.
Payments companies are rapidly disrupting and leveraging new markets as they begin to offer a comprehensive suite of products and services aligned with consumer needs.
BaaS
Another topic of conversation at Money 20/20 was BaaS, or Banking as a Service.according to Deloitte, BaaS “reshapes the banking value chain, opening the door to non-intermediation and enabling new sources of growth”. BaaS providers act as a kind of intermediary, providing the platform and banking licenses necessary for non-banks to offer financial products to their customers (a.k.a. white-label banking).
Card issuing platform Marketa In Money 20/20, we bolstered this theme by reporting that we have expanded our portfolio to BaaS to offer cards, enable money movement, create accounts and insights. As a powerful industry disruptor, Marketa has its finger on the pulse of a new era of banking and a new generation of consumers. They understand that consumer expectations are changing and most, if not all, are doing business through digital channels accessed by mobile phones. Little to no need to visit a physical bank.
Other leading organizations promoting cloud-based solutions at this year’s conference include: Manbu When OpteriumMambu’s solution is the core banking engine of Software-as-a-Service and Optherium is focused on developing a “global ecosystem of decentralized financial solutions” via its multi-wallet & exchange platform. Both companies are empowering fintech by providing core banking services.
This change is forcing traditional players to change the way they do business. We can no longer rely on traditional business models. Organizations must adapt to the new digital world to remain competitive.
Prepare for change
Money 20/20 discusses and examines key industry trends. It’s clear that financial institutions are investing heavily in new technologies, processes, and platforms, but without a full understanding of how they can benefit from trends, businesses will not be able to capitalize on those benefits. It may not be immediately recognizable. 2023 will be an exciting year for companies driving digital transformation within the financial sector, including Bounteous.
At Bounteous, we partner with payments, banking, insurance, and wealth management organizations to generate sophisticated insights that enable smarter decision-making and drive rapid evolution to keep up with important changes. I’m here.
