The topic of money is of interest to everyone and rightly so; it is the main medium of exchange for goods and services around the world.
The use of money has evolved over the years; from commodity barter systems to the use of cash. What has not changed is the value, in terms of whichever means of exchange is used.
In today’s world the value of money, how it is accessed and used are all digitally driven and interconnected in many ways from the consumer to financial organisations. Hypothetically speaking, a layman may answer the question about the future of money as being in the ‘pocket of people’. Technically however, the answer to the question might as well translate into the digital version of what they have in their pocket; just that they will have to access it via different mediums and points of exchange.
Since we are living in a technologically advanced era, how do we automate this with finance to achieve a greater level of value and satisfaction?
At EROE, we help businesses to grow, change and improve how society works through digital and business transformation. As part of a series of webinars which we have been holding since June 2020 to explain business transformation in practicality across industries, we sought to find the views of industry experts on what the future of money looks like, the security space and importance of the banking sector.
EROE provides a secure technical foundation for businesses using digital solutions, and so discussing a topic concerning the future of money is not out of place for us. We believe that Fintech is a very disruptive force in the finance industry, especially that of the banking sector.
Traditional Banking versus Fintech
“FinTech” is the short form for financial technology and describes the use of technological advancement to consolidate the banking and financial sector for a better consumer experience.
In decoding the future of money, there is the need to discuss the role of Fintech in pushing the innovation agenda for traditional businesses in the financial sector such as banks, from both the consumer and organisational perspective. The modern consumer attaches their loyalty to service providers who actually solve their problems.
Banks have always played conventional roles when it comes to consumer monetary roles and how they are accessed. Webinar panelist, Bill Ashlock who is also the Founder of Bosa Advisors shares his opinion that banks have always had the loyalty of consumers traditionally, and so over the years they have not paid attention to the real issues of customer experience until Fintech came in to disrupt the market providing ease of doing things and at a cheaper cost.
In terms of risks, there have been instances of privacy breaches by both banks and Fintech institutions, and so we cannot pinpoint one party to be riskier per se.
In the Fintech space, the main concept is convenience, and there are a lot of case studies to prove that people can put up with a lot of things when they are assured of convenience. It is therefore important to merge experiences with processes to become more interactive.
Many banks are now reinventing themselves to take on Fintech roles within their organisation by providing consumer innovation services via using customer data to help shape the way banking is done.
Segmentation wise, most of the customers of financial institutions for example in the UAE are SMEs and they have peculiar needs which have to be addressed in the most timely and cost-effective ways, of which most traditional banking systems are trailing behind.
From a financial service point of view, institutions should not be perceived as taking risk with people’s monies; neither should they be too altruistic.
With that being said, big banks will always have that responsibility of trust and being regulatorily accountable for it, as opposed to Fintech institutions. Banks largely have government support and play certain roles like being the lender of last resort.
How does culture affect service delivery and implementation of digital currency in financial institutions?
Culture has a very big role to play in addressing some of these legacy solution challenges. Patrick Campos, who is Chief Strategy Officer at Securrency and panelist at the webinar believes that the culture of the UAE for example which does not provide permanent residency for long term stay increases the chances of people having a short-term mentality in terms of financial commitments. Not that he sees anything wrong with how the UAE decides to run the country or its immigration policies, but his point is that regulation can affect the way technology is implemented in some of these financial institutions, especially banks. An example is how onshore and offshore companies have distinct variations when it comes to operating digitally hence the need to use digital platforms like blockchain and cryptocurrency.
Again, the UAE is largely made up of an expat population who expect things to be done in a different way. There is therefore a need to be innovative in the financial environment. Regulation plays a huge role in customer innovation and should be used as a tool to overcome the old way of doing things.
On the other hand, businesses tend to demand for digital transformation in relation to the banking system. This is why Kareem believes that there is a need to understand what the purpose of the financial sector industry is to the layman in the street and the value it can bring. He gives an example where a white paper by Hub71 stated that opening of a business bank account in the UAE takes an average time of sixty-three days! For him, in times like these where digitization is key, it should be taking sixty-three minutes instead.
To think of this is not acceptable considering an IMD 2019 World Digital Competitiveness Report which ranked the UAE as the number one digitally competitive country in the Arab World and the 12th globally.
And so, one may ask that apart from regulatory issues, what else is inhibiting bridging the speed of doing things gap with the needs of the consumer? Well, the panelists agree that expertise is important to execute futuristic hyper-personalised solutions to consumers. Also, there is the need to use technology to streamline automated processes to create systems that actually work for integrated workflow and there is a lot of room for improvement in that space. Challenges for digital currency will be how forms of value, security, cash etc would be shared and used to acquire other forms of value.
With that said, what is then the future of money?
With rapid innovation and technological advancement, it is not very easy to come up with one answer when asked what the future of money would be. However, participants at the webinar largely believe that in the future one form of value such as cash or securities will be used in exchange for another form of value which is digitally inclined. This is largely due to the fact that these digital forms such as cryptocurrency have no ‘middle ground’ value; transactions are made directly from one point of exchange to another. This should be done in a flexible way to prevent ‘trapping’ of money so that people will have freedom to do what they want with their money and access them whenever they wish even though at a financial institution.
Additionally, there is a need for collaboration to make the ecosystem better as there is enough space for everyone to make money and thrive, what people are looking for is the experience.
Regulation comes in here again because for example, you cannot use technology to be disruptive to a country’s monetary system. Technology is an extension of the regulatory extension requirement as processes are now automated.
In summary, the keywords are accessibility, inclusion, fairness and trust, agreed the panelists. The future would be looking at interoperability and more consumer experience. This cannot be done with a binary approach, because no matter what, optionality will always be there.
In Daniel’s view to conclude, companies have to think about people and how they implement things to help in solving the gap in responding to these needs by using rapid response systems. His perspective comes from a service delivery viewpoint. Customer experience is really key, and this is evident not only in the financial sector but other sectors such as retail are being disrupted in providing value to consumers. Those providing these particular services must consider consumers when it comes to their privacy and security. Regulation framework is very important to protect the end customer and also companies and even governments themselves. There needs to be dialogue with governments for example to tackle some of the regulation hurdles.
What the future of money would look like is about the value of transactions, and the future of personalized transactions will be the make or break.
How we think about money and value remains an ongoing evolution.