Redefining the future of finance

By Eric Duffaut, president and global head of customer operations, Finastra

22 September 2020

The impact of the pandemic has been felt around the world, and in so many ways. It has highlighted the need to counter some of the world’s problems and, in that respect, has increased the urgency to create better outcomes for society.

We’ve witnessed an acceleration in digital transformation strategies, as institutions look to better understand their financial positions, particularly in their capacity to lend, and to connect with their customers during these critical times. Beyond this, however, digital has also been driving momentous change across the industry, and for banks and technology firms it’s been an optimum moment to come together around a common goal to improve the lives of millions of people. The move to the cloud is increasing collaboration across the financial services landscape, to build new solutions and initiatives that help to deliver better outcomes for businesses and communities.

Let’s consider some of the biggest challenges our industry faces today and how technology is helping to build open finance and economic prosperity for all.

Supporting financial inclusion
The United Nations Capital Development Fund (UNDCF) sees financial inclusion as a key enabler of its Sustainable Development Goals for 2030, with some form of financial inclusion featuring in eight of its seventeen goals. It believes that digital finance alone could benefit billions of people by creating the platform for more inclusive growth. There’s also growing evidence that empowering women to manage their finances and access savings creates better economic outcomes; greater investment in their businesses, increased productivity and profits.

Certainly, digital solutions are critical in helping to reach a broader audience, including unbanked and underbanked individuals across both developed and developing economies. In addition, platform and marketplace developments are bringing new solutions to market that provide e-wallets, remote bill payment and faster international remittances which could help millions of people.

Addressing the SME funding gap
While digital finance brings increased opportunity, the trade finance gap is still obstructing growth for those countries most in need. Without ready access to cash, ideas and businesses fade away, jobs disappear, and communities suffer. Last year, the global trade finance gap was estimated by the Asian Development Bank at $1.5trn, mostly impacting small and medium-sized enterprises in developing countries, where over 50 percent of requests for financial support to trade are rejected. At the end of 2019 The World Economic Forum estimated this could reach $2.5trn by 2025.

But, as reported by the World Economic Forum, the pandemic has been widening the trade finance gap, with the least developed countries among those worst affected. Closed borders, declining exports, reduced trade, tourism and investments – all of these have all increased the perceived risk of working with financial institutions in the least developed countries.

Against such a backdrop, projects such as Finastra’s collaboration with Mastercard, Asia Development Bank and N-Frnds to provide an estimated 5,000 SMEs access to funding, and a revolutionary microfinance initiative, Trust Machine, can make a real and long-lasting impact. The Trust Machine project, being piloted in Kenya, brings together partners in data, financial literacy, blockchain and scenario modelling as well as technology, reducing the costs of small loans for micro and small business owners. The program aims to reduce the country’s funding gap by one percent and potentially create 50,000 new jobs and sustainable economic growth.

Collaborating for change
The move to cloud has been particularly crucial during lockdown, when bank branches have been closed and employees moved to work from the safety of their homes. Cloud is a key enabler of collaboration – and fundamental to fintechs and tech firms around the world helping banks and institutions better support the communities they serve.
From streamlining back office processes to creating new ways to engage customers, understanding financial positions through data insight, and adopting AI and other advanced technologies – cloud is the platform to deliver added value. Moreover, when it underpins an open platform approach, like Finastra’s, it further powers industry collaboration and enables banks and financial institutions to access innovation faster to better serve customers.

All ecosystem players, big and small, have a potential role to play in making the world of finance and technology more accessible. Technology will be the cornerstone to help tackle some of industry’s biggest challenges including SME funding and financial exclusion in financial services – driving better outcomes for all.

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