When previously it was frowned upon to be addicted to your smartphone and encouraged to have a sense of balance with technology, now having full access to the world in the palm of your hand is a must, Digital Financial given ongoing stay-at-home orders that limit human contact and increase reliance on digital tools. With the changes that 2020 has brought, we have looked to avoid further disruption to our daily lives, leveraging online gym classes, food delivery services, virtual medical consultations and remote work capabilities.
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However, as social distancing continues, financial hygiene remains more important than ever amid ongoing disruptions to the global financial ecosystem. Businesses have begun rejecting the use of cash in order to reduce the transmittance of bacteria, and banks and other financial institutions have closed their physical locations. We must specifically work to avoid further disruption to our financial lives. We must also ensure the full performance of our online banking, where we collect wages, deposit stimulus checks digitally, apply for loans, make investments and transfer our money to another payment platforms, among many other financial tasks.
This is exactly what a 360° digital financial ecosystem entails. It’s not just the way we collect and pay; a complete and universal digital financial ecosystem includes banks, companies, points of sale, credit card issuers, customers, and many other contributors to an effective chain. But the reality is that not all consumers, the key contributors to a digital ecosystem, are immersed and fully onboarded. It could be any number of factors — the lack of financial inclusion to diverse socio-economic groups, insufficient digital financial literacy education for customers, inefficient banking apps, lack of contactless terminals, or low cooperation between companies and institutions. Lacking any one of these crucial elements can generate a bottleneck within financial transactions that impedes a smooth digital dynamic.
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But is the world ready to rely 100% on a fully digital financial ecosystem? According to Bain Consultancy, despite the convenience of digital payments, the United States has not achieved the expected worldwide adoption rates. However, as the months pass during the pandemic, the use of financial digital tools is steadily increasing. The World Retail Banking Report stated that 48% of banking companies are striving to improve their digital innovation capabilities, and more than half of their clients will use innovative banking solutions in the next three years involving payments, cards and retail bank accounts.
A tool banks are urgently employing to fulfill this need of a digital ecosystem and to transition smoothly into digital channels, is the low-code platform. It enables rapid development of apps without requiring technical expertise or coding, and facilitates building digital channels regardless of, and compatible with, any existing legacy systems.
Another key tool in a fully digital ecosystem is the digital wallet. The use of digital wallets has increased globally by 180% in 2020, VeriTran has reported. As more users adopt these platforms, it should be the responsibility of banks to quickly educate their clients and guarantee a user-friendly platform. These previously mentioned tools, when applied on a large scale and accurately, will continue to add value to building a reliable digital ecosystem.
From a macroeconomics point of view, the adoption of a digital financial ecosystem also depends on infrastructure, regulatory and population readiness, all varying in the level of security, smartphone penetration and internet coverage available in the country. A global agreement between governments, banks and fintech is required to address weak infrastructure and regulatory obstacles, to ensure innovative digital channels that meet the needs all parties involved and thus guarantee that financial digitization grows exponentially in the U.S. and in the world. It’s time to embrace the digital challenge as we continue down the path to a digital-first way of life and prioritize implementing an end-to-end financial system.
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