Innovation in retail banking: still failing after all these years; The UN says crypto doesn't cut it in developing nations; Saying goodbye to cash easier said than done.
1. Innovation in Retail Banking: Still failing after all these years
2. UN looks at digital assets in developing nations
3. Bye-bye Cash? Not so fast!
Today’s art: Pordenone Italy, my home town, during the antique market. Note the bell tower, Campanile San Marco, in the background. The bell tower in Romanesque-Gothic style is the symbol of the city; its construction was begun in 1291 and completed in 1347. The town is famous for its Venetian porticos and was once under Venetian rule. The town supplied oak to Venice, 50km southwest, which was used as pilings upon which the city was built.
Personal note: I am writing from Italy, so today’s newsletter will be uncharacteristically short! I finally returned after 3.5 years away due to covid travel restrictions. Please expect shorter newsletters and poor editing for the next few weeks!
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1. Innovation in Retail Banking: Still failing after all these years
The Innovation in Retail Banking Report shows that banks are still failing at digital transformation.
Download: here
A great read that is backstopped by the infamous Jim Marous, who is an unstoppable force of nature in fintech, innovation, and banking.
In his words: “Innovation is important in banking because it drives growth, allows organizations to stay competitive, and helps solve complex problems in an ever-changing world.”
As the author of a book on fintech innovation, I couldn’t agree more. In short, banks must innovate or die.
Still, with only 11% of respondents saying that Digital Transformation is meeting expectations, banks have a long way to go!
A shocking 47% of respondents have digital transformation programs that are not meeting expectations or are lost in various incomplete phases. What of their future?
Overview of key chapters:
–The Future of Innovation During Times of Economic Uncertainty
Innovation has become a critical component of business growth
in the banking industry. Beyond creating the ‘next big thing,’ innovation includes the creation of value through new or existing products, services and processes. It also must incrementally improve customer and employee experiences, back-office efficiency and revenue opportunities.
–Innovation in Digital Engagement
Data, analytics, and new technologies are transforming the art and science of personalized customer experiences, enabling the creation of advanced forms of engagement beyond transactions. Innovation around customer engagement is holistic, predictive, precise, and clearly tied to business outcomes beyond sales.
– Digital Transformation Trends
Digital banking transformation requires banks and credit unions to rethink previous ideas about being flexible and being able to pivot quickly.
– Role of Modern Technologies
The existing business model for most retail banks is negatively impacting both profitability and valuations. To become future-ready, banks and credit unions must rethink their distribution strategy, reinvent their business model and double down on ways to achieve operational efficiencies.
– The Importance of Speed and Scale
Organizations that embrace change, leverage new technologies, support an innovation culture, and move forward quickly with a challenger mindset will be better prepared for ongoing disruption that will increasingly become the norm in banking.
Thoughts?
Takeaways:
—With 47% of respondents still failing at digital transformation, banks have a long way to go.
—Innovation is more important than ever in the kill-or-be-killed world of digital banking.
—We are witnessing the segregation of the digital haves and have-nots.
—Innovation and disruption are the new normal!
2. UN looks at digital assets in developing nations
The UN says that crypto doesn’t cut it for bringing financial inclusion to developing nations
Download: here
The UN once again hammers crypto use in developing nations calling the promise of saying that the benefits that crypto promises are “elusive.”
In short, the next time you read another crypto article touting the benefits of crypto to developing nations, don’t believe it.
The mounting problem is that many do believe crypto’s siren call.
The UN does not mince words:
–Crypto adoption has been strong in developing countries, probably because their financial systems tend to be narrower and less regulated, their macroeconomic stability lower, and their population younger and, therefore, more digitally savvy.
–Crypto assets promise to solve long-standing problems of financial markets in fostering financial inclusion and providing efficient, secure, and affordable monetary transfers, while preserving cash-like privacy. 🔥Examining the economics of crypto assets, however, shows that most of these promises are elusive.🔥
–Cryptocurrencies have no intrinsic value which, combined with their sizable volatility, makes them unsuitable as a unit of account, means of payment and store of value.
–Beliefs in their capacity to increase financial inclusion, reduce costs of remittances, and ease access to investment finance and export credit may, nonetheless, draw developing countries towards crypto adoption.
–Substitution of national sovereign currencies by crypto assets can jeopardize financial stability and the effectiveness of monetary policy, reduce the effectiveness of capital controls, pose risks to countries’ monetary sovereignty and, facilitate illicit financial flows.
–Some crypto challenges can be addressed by regulation aimed at ringfencing existing financial systems, protecting retail users, and bringing crypto exchanges under KYC and AML/CFT requirements.
–CBDCs may address financial inclusion and monetary stability, as well as ensuring secure and transparent access to public money.
–Given the many technical and policy challenges associated with CBDCs, developing countries may consider the potential of fast retail payment systems to provide more rapidly available financial solutions.
Thoughts?
Takeaways:
—Once again, the UN hammers crypto’s promises of financial inclusion.
—Do you think the world's poor should hold highly volatile assets?
—Nations with already weak currencies risk destabilization with currency substitution.
—CBDCs are the answer to financial inclusion, but fast payment systems may be faster to build.
3. Bye-bye Cash? Not so fast!
“Bye-bye cash, hello digital payments?” Catchy title, but cash will be with us for a long time to come!
Download: here
Deutsche Bank Research shows the rise of digital payments and how digital wallets and digital ID are now the norm. That said, this doesn’t mean cash is dead. It isn’t going anywhere and should be with us for a long time.
🔹 The “structural shift” to digital wallets and ID brought by covid:
“Due largely to the external shock of the pandemic and the convenience of digital payments, consumer behaviour has shifted away from cash usage.
In 2022, Europe saw card payments used in a record 34% of point-of-sale transactions, up from 25% in 2019 and 16% in 2016. This shift is now unlikely to reverse, with the drive for change propelled by the vested interest of financial institutions and their efforts to make digital payments more seamless and user-friendly.”
🔹 Raising interest rates reduce cash holdings:
Throughout 2020 and 2021, the near-zero interest rates were associated with a rise in cash in circulation. The rapid rate hikes across most major advanced economies will likely incentivise consumers to deposit or save their money, further reducing the amount of physical cash in circulation.
🔹 But don’t count cash out, it isn’t going anywhere:
– First, as a store of value, cash usage as a percentage of GDP continues to increase in the Eurozone, the US, and Japan. Cash is king when there is a crisis, such as a financial shock or pandemic.
– Second, as a means of payment globally, cash is still essential. We should remember that: (i) 1.4 billion people (over 20% of the worldwide population) are unbanked; (ii) many people around the world still rely heavily on cash (in particular the elderly and those who use cash for small payments); and (iii) cash is often needed in the wake of natural disasters because online access to digital currency is not always available.
– Third, cash remains popular among consumers: one-third of Americans and Europeans still rank cash as their favourite payment method.
Thoughts?
Takeaways:
—Covid caused a “structural shift” away from cash that is not abating
—High-interest rates will further reduce cash in circulation.
—Reports of cash’s demise are exaggerated, it isn’t just quaint but a necessity for us all.
—Good luck with digital in a natural disaster!
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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is number 4 on Onalytica's prestigious Top 50 Fintech Influencer list and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.
Please check out my books on Amazon:
Cashless: HERE
Innovation Lab Excellence: HERE
