Despite the transformative changes we have seen in the banking sector over the last decade, there remains a considerable disparity in accessing financial services from country to country and even vital day-to-day services such as cross-border payments or funds transfers. Mushegh Tovmasyan, founder of Zenus Bank, writes
A strong emphasis on banking personalisation has driven us towards bigger and better digital experiences. Meanwhile, continuous globalisation and the requirement to engage across borders means the need for global financial inclusion where individual customers, as well as businesses, have the same sort of access to useful and affordable financial services across transactions, payments, and savings, through digital banking is more apparent than ever.
The rise of challenger and neo banks, as well as fintech providers, has transformed the capabilities of the banking sector, which can now offer a vast array of services to customers. These include new interactive service models, from cryptocurrencies, Buy Now Pay Later products and embedded financial lending services from companies across various sectors – ranging from supermarkets to global sports companies – outside of the banking industry. Meanwhile, the pandemic exacerbated the trend towards completely digital companies that operate remotely and need to be able to provide cross-border services instantly to work with other globally-orientated partners, pay staff anywhere across the world and expand global supply chains into new geographic markets.
Cross-border payments in certain regions
One area that is growing rapidly is Latin America, where fintech investment has accelerated significantly. The region saw growth of nearly four times, rising from $4.1bn in 2020 to $15.7bn in 2021. Latin America serves as a perfect breeding ground for fintech start-ups. Primarily because banks across the region have, historically, only served affluent individuals due to a lack of competition and stringent credit requirements. A large portion of the overall population is still underbanked, ranging from 30% to 50% in major countries. Even for those with credit cards or bank accounts with local banks, the user experience is generally poor, while many banks have failed to invest in technological infrastructure and improve the digital experience.
Clearly, across the region, there is significant demand for access to a global secure bank account for a range of needs. For employees in developing economies working for companies who currently wait weeks to be paid through local banks. For small businesses looking to access and collaborate with new markets, and to provide access to a strong currency – the US dollar – for those in developing countries with less stable economies, transforming the capabilities of international digital banking. This trend has only accelerated as remote working has become the new norm and companies employ staff all over the world. Offering a secure, transparent and scalable international bank will be vital for banks to provide financial inclusion to millions of people, businesses and organisations still without these essential products.
Consequently, the banking sector is now investing heavily in products that can offer secure, transparent and scalable international payment services that will be vital for providing financial inclusion to millions of people, businesses and organisations operating in developing economies. Cross-border banking, for example, and the ability to transfer money across bank accounts from different countries, provide a unique challenge that many banks are looking to address. While money has always been transferred across borders, the increase in cross-border flows of both capital and citizens in today’s world has resulted in more financial organisations looking to provide this service instantaneously.
In response, international banking licenses – the concept of globally-focused banks running on the same technology infrastructure across each country under one global license – are now being repurposed by banks to not just service High Net-worth and ultra wealthy customers but for anybody, anywhere in the world, especially in emerging countries where the need exists the most.
Banking accounts can be opened remotely and accessed from anywhere, providing customers with a global footprint, constant access to their funds and providing access to a global account for those in developing countries with less stable economies.
This growing trend will be one of the defining changes across the global banking sector – helping to address the recurring problem of transferring money overseas from a complex, expensive and time-consuming process to an instant routine task – and is the main area we are investing and working with strategic partners to help scale these services for customers across the globe. By also offering our banking infrastructure via API’s and White Label services, we enable prominent Brands and fintech providers to expand their global reach and explore new revenue verticals. UK fintechs, for example, could service US clients or Latin American clients helping cross-border banking to become accessible everywhere.
These changes will also help complement the rise of embedded finance services such as Banking as a Service (BaaS), providing financial services to any company, no matter the sector, that is looking to adopt and implement these products on a global scale. The concept also has the potential to transform and democratise in developing nations, where it can take a few weeks for people to be paid through local banking channels.
The demand for simple and seamless cross-border payments could help transform the global banking system. Not only by providing new standards for the global banking sector but by ensuring customers can have access to an international bank instantly and no matter where they are based.