We take a look at the consumer trends driving innovations that will transform the way people earn, spend and manage their money.
TREND 1: A new generation searches for new solutions
COVID-19 has brought about the emergence of a new generation of banking customer with more complex financial needs. These customers are seeking out more diverse income streams and new ways to invest. They are also more willing to experiment with new digital financial services and tools.
The financial needs of young consumers are changing radically
The pandemic has spurred consumers, especially younger people, to seek out new sources of income and home in on their long-term financial goals. The respondents in our survey are highly driven – 79 per cent of them say they would rather work harder to get ahead in their career than work fewer hours in return for less pay. This is even more pronounced for those aged 18-34 where 86 per cent would rather work harder. Younger consumers are open and eager to diversify their income streams – for example, by setting up a new business or launching a ‘side hustle’ to supplement income from other sources. Their digital skills also make them more confident in their financial futures.
In the next three to six months:
Consumers are now much more willing to experiment with innovative banking technology Since the start of the pandemic in early 2020, consumers across the world have been embracing innovative banking technology more than ever before, and young people are more experimental than any other generation. On average, 29 per cent of 18 to 34-year-olds have started using new digital money management tools during the pandemic (compared to 19 per cent of those over 45) – including setting up digital-only banking services, using mobile wallet payments or opening a wholly digital bank account.
POST-PANDEMIC SCENARIOS
Agile investing – Investment and savings apps will transform to become on-demand services. Retail investors and savers will be able to scan a QR code or tap on their phones, as if they were purchasing a product, to be able to invest in a business or a product of their choice. Automated switching services for banking – Intermediaries will become popular with consumers, enabling them to transfer their banking services automatically between suppliers towards the best deal, hassle free. Digital nomad banking – New digital entrepreneurs will emerge, starting their own businesses and side hustles. These customers will expect their banking services to actively support this, allowing them to move fluidly across different geographies, and more dedicated ‘nomadic’ banking services will evolve.
TREND 2: The shift from physical to digital banking is picking up pace
COVID-19 has accelerated the transition away from physical branches and cash, fuelling the growth of innovative digital banking services. This has put the long-anticipated future of a branchless and cashless society on fast-track.
A branchless banking world is coming earlier than expected
Over 50 per cent of our survey respondents globally have made more use of digital banking on their mobile, tablet or laptop in the past few months. COVID-19 has accelerated adoption of basic digital banking services, and this trend is not temporary. Consumers are increasingly using digital tools to manage their finances – embracing automation and digitisation, including online-only bank accounts and money management/budgeting apps. In the future they will interact less with physical branches or use them in new ways.
Beyond paper: a cashless society by 2030
A surge in online purchases and working-from-home arrangements during COVID-19 has accelerated the transition away from cash faster than expected before the pandemic.
A majority of respondents in each of the markets we surveyed (except for Pakistan) believe that their market will go cashless in the future – amounting to 64 per cent globally. On average, people predict that this will happen by 2030.
The rise of super apps – Increased use of multi-purpose, multi-faceted super apps will spread from early-adopter markets in Asia, to the rest of the world. Users will increasingly be able to consolidate all their mobile activities into a functional one-stop-shop that fulfils not only their banking needs but many other payments and lifestyle services. Investment in experience – In lieu of branches being used to manage everyday finances, interactions between banks and customers will evolve in new physical and virtual spaces. Branches will shift from being a place for everyday financial transactions to places of rich experience, such as learning in an interactive classroom or relaxing in a coffee shop. Biometric security becomes more important – The rise of secure banking via fingerprints and face/iris scans will reach a tipping point where biometric security overtakes traditional security mechanisms such as PINs to become the go-to method for people to protect their money.
TREND 3: Our approach to spending and managing money is becoming more mindful
People around the world are changing how they spend their money and what they spend it on. The pandemic has accelerated the shift to online shopping, but this is not the only change – people have become more cautious about their purchasing decisions, and more mindful about what they buy, with increased preference for locally-made, sustainable products from small businesses.
The digital high street: online shopping is growing rapidly, while hyper-local, ethical spending is on the rise
Almost half of our respondents (48 per cent) say they are likely to prefer to buy online in the future. While there has been an unprecedented increase in the proportion of online shopping, over 50 per cent of people globally say that COVID-19 has made them more inclined to shop with smaller, local retailers, and to buy more sustainably sourced products. At the intersection of these dynamics, we can expect to see people doing more of their online shopping with small-scale, independent and sustainable businesses.
Consumers are becoming more cautious and resolved to manage their money better
The pandemic has prompted consumers across the globe to take stock of their finances and to educate themselves to improve the way they currently manage their money. People of every age and geography – but particularly younger people – have responded to greater pressure on their finances by tightening their grip on their spending and turning to new tools to manage their money.
Impact investing will flourish – Long-term savings accounts (such as retirement accounts) and other investing practices will become more flexible and go beyond the environmental, social and governance (ESG) retail investments currently on offer. These new services will give customers the opportunity to back specific causes with their investments. The emergence of more local and sustainable online businesses – Businesses will respond to consumer appetite for more ethical online products and services by adapting their business practices and products to meet new expectations. Businesses will also invest more in their online presence to entice increasingly digital savvy consumers.
Ethical data collection – As consumers increase their attention to their spending, banks will facilitate this by collecting more data and sharing it with other apps as necessary. The ethical use of such data to protect consumers' privacy will be increasingly brought to the fore for users and financial services.