Payment Trends in the UK and the Baltics

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Technologies, including artificial intelligence and the internet of things, coupled with the gig economy, have created a new standard for financial services. Consumers are no longer limited to the legacy systems that banks provide, and have begun experiencing more convenience.

Evidence shows that consumers are increasingly expecting features typically associated with digital technology like messaging, online shopping and smartphone-fueled ride sharing in financial services, according to MoneyLive Report 2019.  

The role of cash in European countries is diminishing, and while it’s not obsolete, the UK is going more in the direction of a cashless society like Sweden. Cash is increasingly giving way to alternative forms of payments across digital, mobile, contactless and more in major European jurisdictions including the UK and the Baltic states.

 

Digital Revolution

Modern lifestyle demands mobility and 24/7 support, and digital banking solutions definitely win this battle over traditional banks. Approximately three-quarters of the adult UK population already uses online banking. Mobile banking is on the rise in the region, with the number of banking app log-ins rising 13% in 2017, reaching 5.5 billion. With the new digital finance products hitting the market this digital grip is expected to grow stronger. According to a recent fintech survey by MoneyLive, bankers expect more than one-third of their customers to rely on alternative financial services within the next couple of years alone. The momentum is expected to increase beyond that over the next five- and 10-year periods.

Source: MoneyLive Report 2019

 

Fintech Market Landscape

The fintech market landscape has become increasingly competitive. UK-based mobile bank Monzo is credited with having created the “freeze” feature. Basically, customers who panic that they might have lost their bank card can temporarily freeze the card until they’re sure. Once they locate the card in their jeans back pocket, for instance, the freeze can be lifted. Since integrating this feature, big banks like Barclays have replicated it.

Monzo continues to gain share, however, boasting more than 1 million customers and tens of thousands of new accounts being opened on a weekly basis. Meanwhile, mobile- and cloud-based bank Starling Bank, which is popular among millennials, experienced a 500% increase in new accounts between November 2017 and July 2018. Starling and Monzo are rivals, competing on products like trendy debit cards: Starling, for instance, made a teal-colored vertical card.

Revolut, another UK-based fintech play, has received the regulatory approval to expand into Lithuania. The startup was drawn to this Baltic state for a “regulatory environment” that is “incredibly fintech friendly,” according to a Revolut spokesman cited in reports. The company, which offers a pre-paid debit card for traveling among other products, already calls 150,000 of Lithuanian residents its customers. Now it will be able to extend fast and cheap loans to UK residents starting in 2019.

In addition to startups, Google is also making a push into Lithuania. Google Pay has received the regulatory approval by the country’s central bank for an e-money license, which means it can deliver e-money and other services across the European Union.

Not to be outdone, Estonia’s entire government is moving toward a digital model. Estonia, which has a population of approximately 1.3 million, is expected to rely on a single digital platform for handling everything from receiving a prescription to issuing digital birth certificates. This could pave the way for more financial services to also be completed online and could be a model for other countries.

 

Cashless Society Would Take A Toll

The rise of non-cash payments could take a toll on certain groups in society. For instance, people with low incomes or who are saddled with debt might not be able to take advantage of the digital revolution. This is also true for people with physical disabilities or those in dysfunctional relationships in which the finances are controlled by someone who is abusive.

Digital payments are also dependent on a strong internet connection, so regions in which the internet infrastructure is weak would suffer in a cashless society. In the UK, 25 million citizens still rely on cash, but that number is expected to dwindle in the coming years.

Traditional banks understandably feel threatened by the rise of fintech services, as they’ve seen the market disruption that companies such as Amazon, Uber and Airbnb have achieved. Consumers are no longer satisfied with online banking alone and have come to expect cards and mobile apps that will help them with everything from budgeting their money to spotting the hottest deals. The digital revolution is here and it is changing the world for consumers and businesses alike. 

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