The Meteoric Rise of Alternate Banking Systems
The COVID-19 pandemic has steered the banking industry worldwide towards digital transformation. Traditional financial services became redundant overnight leading to a historic rise in the adoption of fintech platforms across the world. Cashless payments became more popular due to the need to lead our daily lives in a contactless manner.
Apart from that, individuals and institutions began to realise the many benefits of switching to digital payment partners over continuing to make payments through their regular banks. This rush of digitisation was compounded by the massive boom of fintech startups providing a much more convenient manner of managing and transferring money.
Some reasons why alternate digital payment providers are becoming quite popular are:
- Enhanced Accessibility - Digital payment options make large international payments more accessible to companies. With people diversifying their business and expanding to overseas markets, one needs to have easy access to making larger transactions; time is of the essence to such companies/ start-ups hence, a quicker payment gateway and effective customer services can really act as a game changer.
- Accelerated Adoption - The COVID-19 pandemic has accelerated the adoption and development of digital payment methods as individuals began preferring contactless payments and businesses pivoted to digital structures to save overhead costs and make their services accessible to more customers/users around the world. Even on a day to day basis,customers are opting for digital payments rather than physical currency,making the digitisation imperative.
- Cost Saving - The new normal has “forced” companies and individuals to embrace technology in order to facilitate work-from-home opportunities, resulting in a diaspora that is more open to trusting digital payment systems. According to the May 2020 Mckinsey and Company report, the levels of remote working have skyrocketed during lockdowns and are likely to stay that way. Remote working can help organisations move at a faster pace as companies tap into new labor pools and specialised remote expertise while also saving on overhead costs like office maintenance, sanitation, professional equipment, etc.
- Lifting Barriers - Due to the increase in individuals and companies working virtually, the traditional barriers for transferring funds and liaising with executives have been lifted. For example, immigrant workers working in countries like the US and the UK have to wire money to their families regularly. They end up paying quite a lot in overseas transfer fees and commissions to their banks and cannot fully reap the benefits of their hard-earned money. In such cases alternate digital payment services provide some respite by making it possible to identify the right payment providers and even facilitating cost-less transfer of funds across countries and continents. This is much more beneficial compared to visiting a forex office and dealing with excessive paperwork.
- Personalising Finances - There is greater adoption of finance apps and financial education platforms around the world as fintech startups are growing rapidly. Platforms such as neo-banks provide various ways of saving/investing your money in a modern and personalised manner. Without having to deal with any corporate or financial jargon, users feel they have more control over their finances as they are able to understand them better. Using AI technology, many digital payment providers are able to cater their services to the needs and knowledge of the individuals, rather than making the individual adapt to their platforms and driving away potential, on-the-fence users. Apart from this, all of their financial information is available at the users’ fingertips - making it easier to make sense of their financial position.
- Increased Security - Digital payments portal guarantees faster and more secure transactions. The customer’s personal information, documents, passwords, and transaction history are extremely well preserved by these AI driven platforms. E-commerce giants also rely heavily on digital payments, as it makes the whole shopping and retailing experience more secure. Hence, providing a holistic customer experience.
The McKinsey COVID-19 US Digital Sentiment Survey, April 2020 stated that 75% of people using digital channels for the first time indicate that they will continue to use them when things return to 'normal.' The trend towards digitisation is growing at a faster rate as fintech platforms develop their products to create a customer-centric banking experience. Such companies have identified and bridged the gaps within the traditional banking sector, creating a digital ecosystem consisting of financial applications catered to individual users and businesses. This system is neither bound by geography nor by unnecessary regulations which tend to slow down the financial management processes. This is the future of banking, and it seems like it’s here to stay.