The way we move money is changing. With 24/7 digital technology allowing consumers to remain connected, industries are adapting their services to meet shifting consumer behaviour. According to analysis from the UK’s Trade and Investment department, the UK Fintech industry currently generates in excess of £20bn in revenue. Many large financial organisations are now partnering with innovative start-ups to create in-house incubators to enhance their own product offering, and reach connected Millennials.
Technological growth in the financial industry has been hugely important; for global corporations, transactions can be made and tracked within seconds. Retail banks and money transfer organisations no longer offer their services from just high street locations, but utilise an omni-channel approach across devices and platforms, including online, mobile and social media. In this globalised society, the rapid expansion of digital technology offering consumers an accessible and convenient service is imperative. For the cross-border payments industry, technology is crucial to maintain the vast networks of consumers who transfer money across the globe every day. Payments is just one area of the industry where the biggest innovations are taking place, and both innovative start-ups and established names are driving the modernisation of the process.
The latest trend in the financial sector is building the brands and relationships between the consumer and the retailer beyond a transaction. Mobile wallets, for example, were developed from the idea that making payments via mobile for the sake of it adds little value to either the retailer or the consumer. Mobile phones provide instant access to a wealth of real-time information, which can help influence decisions on financial transactions and management. Data from Adyen shows that mobile payments now account for 29% of all online transactions globally. This is a clear area for growth with 80% of the world’s adult population projected to have smartphones by 2020.
Sub-Saharan Africa is arguably leading the way in the adoption of mobile banking. In 2014 data from the World Bank showed that mobile banking has increased to 16% of the market. The prolific use of mobile phones for payments in Sub-Saharan Africa is largely driven by the lack of banking infrastructure across this region. Many Africans do not have a traditional bank account (only 34% according to the World Bank’s Global Findex 2014) but are mobile phone users. Building a stable foundation for financial inclusion requires a number of financial solutions. For this region, remittances in particular contribute to a significant part of the GDP, are more than double all sources of foreign aid combined and often surpass earnings from major exports. According to a brief by the World Bank, remittances in Uganda are double the country’s income from its main export of coffee. Financial innovation in this region is expanding at a rapid rate and it will be interesting to see what impact this has on the evolution of the local financial services landscape.
There are a number of motivations for moving money, both locally and globally. Creating a network to connect people, which is at the heart of digital innovation in the payments industry, has definitely influenced technological expansion. Consumers use these services for a variety of reasons: to support family members overseas, for emergency aid purposes, education and even for start-up businesses. According to our proprietary tracking studies, 25% of our consumers transfer money for educational purposes. Providing a platform to facilitate higher education is a priority as the number of students studying abroad is estimated to grow 75% by 2025 to more than seven million according to a study by UNESCO.
Building on agent locations across the globe, financial organisations are increasingly incorporating social commerce solutions and partnering with key players in the social media sphere to enhance digital, cross-border money transfer. Our recent partnership with Viber, a leading instant messaging and voice over IP (VoIP) app enables users to send money to friends and family anywhere in the world from their smartphone.
In an increasingly globalised world, where people are becoming more transient and businesses are expanding their global footprint, digital innovation is key to driving inclusion in the larger global financial ecosystem. We are no longer limited to the traditional bricks and mortar method of moving money but have an array of solutions available to service a demanding generation of digitally-savvy millennials. Technology is allowing us to connect with new financial audiences throughout the world. The digital landscape is evolving at a meteoric pace and organisations need to ensure they are agile and adaptable in order meet the new challenges and opportunities that lie ahead.
By Massimiliano Alvisini, Vice President Northern Europe, Western Union.