Digital finance formulates financial services such as payments, money transfers, loans, and remittances at an affordable cost through mobile phones, the internet, or bank cards for all sectors, ranging from multinational financial institutions to basic household needs. It has evolved into the most dependable source for a fast-paced generation; It has evolved as a result of innovators and fintech. And financial inclusion is now considered a requirement in emerging and underdeveloped nations as well. The emergence of fintech companies like digital payment providers, digital insurers, etc., has diversified and expanded according to the geographical and economic needs of a country rather than to common regulatory rules and conditions across the globe. As a result, this digital finance transition has worked to enable simple and secure access to financial requirements. Even those with low incomes can transfer money or make payments without having a bank account.
According to a 2019 study by the International Monetary Fund (IMF), the usage of mobile-based payments has been steadily increasing with 2.9 billion users of digital commerce transactions and 1.1 billion users of mobile POS payments by 2019. This is seen increasingly among the emerging countries, mainly China and India.
The impact of COVID-19 on digital finance
Presently, COVID-19 has pushed us to recognise the significance of digital developments such as OTT platforms, e-commerce, online health consultations, smart accessories, and, most importantly, financial services.
The digital finance transformation has accelerated different types of financial services rather than just payments. Now we can have instant insurance, loans, savings, credits, and purchases of stock markets and investments. This entire strategy has evolved to accommodate people’s rising desire for quick, efficient, and secure access to goods. This digital financial transition has impacted a variety of industries, such as:
Despite the fact that commercial units and other operational businesses were suspended for a few months during the lockdown in order to prevent the spread of COVID-19. This indicated a serious economic crisis, resulting in firm closures and a rise in unemployment. Aside from these threats, it was digital finance that emerged from the shadows to save the day. Yes, it has become a general necessity for all fundamental financial transactions. Digital finance facilitated wage payments, tax payments, direct business-to-business payments, and security settlements that reduced office function costs and avoided intermediators such as banks. The other sector was microeconomic businesses. They penetrated through social media and flourished with the help of digital finance, making payments and transactions and also keeping an account of expenses and profits up to date, rather than seeking assistance from time-consuming traditional financial services.
On the other hand, governments across the world have extended options for their citizens to satisfy their requirements connected to government operations such as pensions, taxes, scholarships, allowances, stipends, wages, and so on. It helps underprivileged women have a progressive livelihood and keeps track of their earnings and savings.
- Fintech companies
Fintech companies responded to the pandemic by developing several advanced designs to meet people’s demands. They advanced their digital financial transformation by experimenting with technology in financial services platforms such as cryptocurrencies, cyber security, payday lending, quick check-cashing services, and cross-border payments. In other words, instead of visiting the bank for a money transfer, we use our mobile phones. Fintech is a fast-emerging sector in today’s financial services. It is also a reachable financial market for ordinary consumers. It is proven to provide basic financial services with cost-efficient and safe services. Example of fintech companies like Crosspay.
We are fully aware of how COVID-19 has impacted the lives of everyday people. During the lockdown, we were obliged to use digital services, which proved to be the most convenient. Specifically, contactless person-to-person transactions (P2P), meaning quick payments, money transactions, and remittances through net banking and mobile money, or e-wallets. Hence, everything is just a click away, and social distance is maintained. The majority of the population has a smart mobile phone, including the underprivileged class. Therefore, financial inclusion was made possible through smart mobile phones, allowing even lower-income citizens to make payments and save money without having to go to banks or large markets.
Benefits from digital finance are:
- Simple and quick.
- Available in remote locations.
- Fewer rules and regulations.
- Round the clock customer service.
- Offline and online services.
- Diverse services and schemes.
- Safe digital platforms.
New trends in digital finance in 2021
Emerging developments in digital finance are closely related to future strategies for development goals and improved financial services. These trends interpret both the present and the future, attempting to experiment with cutting-edge technology in financial services in the future. The following are some current trends in digital finance:
- Robotic Process Automation (RPA): Indirectly, RPA means technology that makes things easier and faster in verification, customer authorisation, risk assessment, language processing, data analysis, and security checks without the need for a humanoid. And this is what fintech companies do: experiment with technology. In 2021, all companies, whether a government or a large financial institution, are looking to optimise their traditional methods in order to stay ahead of the competition.
- Security measures: We are all aware of the fraud occurring within the digital world, particularly related to money. Today’s digital finance is keeping this in mind to protect its customers from such fraudsters. But it is not just some email spam or messages; we are also talking about viruses such as malware that can steal customers’ personal details. Therefore, companies are seriously striving for every new improvement to avoid huge mistakes. For example, OTP (one-time password).
- Blockchain: Blockchain technology is the new security measure for digital transformation. Meaning, blockchain is a digital technology that stores financial transactions and asset records of a company that is difficult to hack into. It is an effective management solution, and transactions are spread across computer networks safely.
- Digital payments: Of course, as we discussed, we are in the digital payment world; we do payments digitally. So, what’s new in it? Well, aren’t we still using currency notes, but comparatively less? Yes, and this is what technology is trying to change. Change the world to fully digitalised financial transformation without the use of currency notes, like payments or transactions solely relayed on digital devices and the use of cryptocurrencies. This is probably what the future holds too.
The future of digital finance
Speaking about the future of digital finance, there is a lot to assume and things to work on in order to achieve greater and quicker economic growth. Since we humans are programmed to adapt and evolve according to faster needs and change. And as we are leading our way to the future and future generations probably in pace of super intelligence. So, in the future we are looking forward to artificial intelligence (AI) and automation. As we previously discussed RPA and digital payments, they are similar but more advanced than what we see now. According to research, 73 percent of the public prefers self-service, and this percentage is likely to increase in future years. Therefore, the technologies are determined to bring what people need and enforce a faster workforce. At the moment, AI has the potential to alter the course of financial services. It functions similarly to a human, so perhaps in the future you won’t even need to pick up your phone to transfer money. All of your financial services, known as touchless interfaces, will be performed and reminded by your automaton. Next is the collaboration between banks and fintech. With banks improvising themselves for better platforms in terms of services and fintech advancing itself with technology. Therefore, as both share equal developmental goals, collaboration can bring about the most effective services for customers. Next is the workforce and workplace. It will be more advanced, leaving pen and paper behind with fully digitalised networks, computer records, self-service and flexibility.
As we are moving forward in the future with the same goal of a better future and better services, we hope to sustain the integrity and safety of our customers too. Digital finance is not only aimed at the betterment of common people but also involves financial inclusion for the betterment of underprivileged people across the globe.