One of the sectors that has evolved the most in the last year has been digital payments. While cash payments fell by 16% globally in 2020, the use of digital wallets increased with adoption peaking between 40% (Indonesia) and 90% (Australia), according to a McKinsey report.

This new picture will keep changing and moving forward: in Europe, for example, it is estimated that digital payments will grow by 70% in the next five years and, in Latin America, it is projected that the number of cell phones will exceed 590 million by 2025. Bearing in mind that mobile payments are booming and the low penetration of credit cards in the region, it is likely that mobile payments will become more popular every day.

Among the most outstanding trends are the contactless methods from the mobile or other devices such as wearables (watches or other accessories). QR codes and the use of electronic wallets will break records, according to an analysis by the fintech Paynopain.

Although with a lower adoption, cryptocurrencies are going from being just a way of saving and investment to being, in addition, a payment method in normal purchases and some even dare to collect their salary or buy and rent properties with them. From Paynopain they also identify virtual currencies as one of the habits that will grow in 2022.

Integrated finances or embedded finances is one of the most important and deep trends in the financial industry. This model allows non-financial industries to offer financial products within their digital ecosystems to improve the customer experience. Achieving this model entails profound changes such as the one proposed by another highly relevant phenomenon: open banking.

Open banking

Open banking allows each user to be the owner of their data. This means that banks must open the financial information they have about their customers (if they consent) so that other institutions can use it and thus offer services with a higher level of efficiency and expand the value offer that the user receives.

Open banking is part of a trend related to the demands of consumers, who do not want to continually change platforms every time they shop or sign up for an online service. Instead, they prefer to receive financial services and payment options in the same one single place.

This is achieved through the incorporation of APIs, that is, technological solutions that integrate part of a company’s software with a third party’s platform from where a client’s banking information is obtained safely.

Thanks to these advances, banks, fintechs and other industries may be able to offer a wide variety of services, such as Buy Now, Pay Later (installment purchases through immediate credit without the need for having a card), or contracting insurance and other financial products more personalized and at lower costs.

Little by little, is being imposed a business model that places the customer at the center of the structure of products and services that are available through multiple means, 24 hours a day. This scenario requires a deep understanding of customers in order to provide them with the best service. To do this, it is necessary to collect and process information provided by these technologies, detect their needs and anticipate them with solutions tailored to each customer.

The start of a financial revolution

Both open banking and embedded finance allow companies to be protagonists of the digital future of finance based on their own trust built with their customers. And, like every trend, being among the first always brings benefits.

For Pablo Ces, CEO of Flexibility, a provider that connects financial services, “the winners will be those who know how to adapt and manage to use the technology and services available to create their own ecosystems thanks to their current market penetration, that is, take advantage of their community of users to conquer the field of embedded finance”.

Likewise, open banking offers the opportunity to create more attractive products for the young target, who are more reachable for new developments. According to a study by the banking platform Backbase and Americas Market Intelligence (AMI), 75% of young Latin Americans between the ages of 18 and 21 prefer to hire services from neo-banks and fintech’s rather than from traditional banks.

Regulation is distinct on both sides of the ocean: while in Europe there are already two laws that promote access to bank data (the General Data Protection Regulation -GDPR- and the Payment Services Directive -Second Payments System Directive or PSD2- which came into force in 2018 and 2019 respectively), in Latin America there are countries that have adopted a more “wait and see” policy.

One way or another, the truth is that the market follows its path. For this reason, companies that seek to position themselves and get ahead of this new reality will have the challenge of generating innovative financial products without losing sight of the fact that time-to-market can make the difference between the success and failure of any initiative.

The presence of a technological partner that accompanies from the conception of a product is essential: in any product or service that you want to offer, it will be essential to have the ability to combine the existing data from previous databases with the information provided by the banking entities.

A complete data management platform such as Conciliac EDM will allow fintech’s and all industries companies to centralize, automate and standardize all the processes that involve integration, validation and data management in general. In this way, it contributes not only to design new products based on true data, but to accelerate the time to market and the focus on the analytical processes instead of the operational ones.

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