Banking Trends 2022
During the early stages of the COVID-19 pandemic, in compliance with lockdown and social distancing rules established by governments to control the spread of the novel coronavirus, many businesses were forced to leverage digital technology for full/partial online operations. Remote work began to trend in nearly all industries. Even the banking industry has been evolving dynamically since then.
For example, the global market size of challenger banks and neobanks is growing very fast. It is to increase from 47 billion US dollars in 2021 to 2.05 trillion US dollars in 2030, that is, at an annual average growth rate of 53.4%, according to recent estimates on Statista. That sounded interesting, right? Read on to discover more thought-provoking trends in the global banking industry as of 2022.
Popular Digital Banking Trends
There are several interesting trends in digital banking. Here are the popular topics:
Increase in “online-only” banks
The global banking industry is experiencing the birth of more challenger banks and neobanks since the pandemic. These banks operate entirely online – without physical branches. They render their services to their customers via mobile apps and web-based platforms. Thus, they are using advanced technology to provide low-cost specialised banking services and payment solutions to market segments (such as kids, freelancers, digital nomads, vegans, and environmentalists) in ways that traditional banks are not finding easy to emulate. In addition, it is anticipated that neobanks will merge for growth acceleration since there are already too many of them. For instance, some digital-only banks for international wire transfers may consolidate before the end of the year.
Continued partnership with non-banking FinTech firms for banking-as-a-service (BaaS)
Financial technology (FinTech) companies deserve accolades for fostering the evolution of the banking industry through the development of systems like banking-as-a-service (BaaS). Following the introduction of BaaS, third-party organisations are rendering some sort of banking services and financial products to their customers while retaining their original statuses as non-banking entities. For example, by connecting to the application programming interfaces (APIs) of banks, non-banks can issue customised debit and credit cards to their retail customers.
Surge in buy-now-pay-later (BNPL) transactions
The idea of payment by instalments is not new to us. But the spread of transactions that allow people to buy now and pay later (BNPL) cannot go unnoticed in how digital payments are made today. BNPL makes many products seem more affordable. Gen Z and millennials (young people, born between 1981 and 2012), in particular, are attracted to e-commerce companies that offer this type of payment for their products. Thanks to FinTech, there are apps like PayPal and Klarna that make BNPL easy. We will tell you more about them later in the article.
Friendlier attitudes towards digital tokens and electronic currencies
Recognition and regulations in favour of digital money are increasing nowadays. Some central banks are creating national digital currencies, popularly referred to as Central Bank Digital Currency (CBDC), as online forms of their fiat currencies (paper money). For example, e-Naira, which is Africa’s first CBDC, was launched by the Government of Nigeria in October 2021. As of April 8, 2022, 87 countries are looking into the possibility of issuing a CBDC, while nine already have. Meanwhile, Bitcoin, Ethereum, and other digital tokens (also known as cryptocurrencies) are gaining legal recognition and acceptance for digital payments across the globe. For instance, it is now possible to use crypto to pay for purchases at a global online retail store – Amazon.
More use of artificial intelligence (AI) and machine learning (ML)
Some top banks are working on using AI and ML to streamline their operations, reduce staff compensation costs, and keep a small-sized workforce with high productivity. For example, income statements and balance sheets are now synthesised for the speedy processing of applications for commercial loans, thanks to artificial intelligence and machine learning applications.
The rise in cashbacks and other loyalty programmes
More banks, payment services providers, and financial institutions are using loyalty programmes to create value for customers, attract new customers and retain existing ones at reduced costs. They are using e-commerce coupon offerings and cashback to increase customer loyalty. An example is Capital One (Capital One Shopping).
More advocacy for sustainable banking (green investing)
Regulators and investors are advocating for banking that puts people and the planet into consideration, and not just profit. Similarly, some customers want banks to significantly reduce their carbon emissions, hence the shift to certain neobanks that offer sustainable banking products and services. Consequently, many banks are employing executives who direct and manage their operations in compliance with environmental, social, and governance (ESG) standards.
Trending Digital Payment Solutions
Since there are numerous digital payment solutions today, we decided to pick only the best of the best and place them into different categories that connect them with the current banking trends. They are as follows:
Best for Buy Now, Pay Later (BNPL)
Klarna (for large purchases)
Klarna is your best BNPL payment solution for large purchases – it has no predefined credit limit. It allows you to split the cost of what you have bought into 4 interest-free payments which you can make every 2 weeks. Alternatively, you can choose an option to complete your payment in 30 days. The mobile app is available for free and can be used for items bought online and in-store. You can also use its browser extension from your computer for free. But Klarna must approve every purchase, which means that you could be denied.
PayPal (for small purchases)
Use the “PayPal Pay in 4” payment plan from PayPal to make four interest-free instalment payments for small purchases. It can be used for transactions between US$30 to US$1500 only. While you can use it at millions of online merchants, PayPal will have to approve or deny your purchase.
Best for Cashback
Capital One gives you credit cards with unlimited cashback. You can get the “Savor & SavorOne Rewards” cards which you can use to earn money (from 1-8%) on dining, grocery shopping, and entertainment; or the “quicksilver & QuicksilverOne Rewards” cards which you can use to earn a flat rate of 1.5% on every purchase you make daily. The cards give you a percentage of every dollar you spend on all qualifying purchases.
Vivid is a FinTech company that offers a digital account with a card. Through Vivid’s cashback programme, you can earn 1% cashback on every purchase you make with its card. Also, you can receive up to 25% cashback with its Super Deals offer.
Best for International Payments
The cost of sending money internationally via Wise is one of the cheapest in the world. It issues a multi-currency Visa debit card. The company charges no hidden fees and can speedily process secure money transfers to over 59 countries. You can findmany reasons to use Wise on our website.
Best for Paid Current Account
bunq is a neobank for individuals and businesses to create and manage current accounts using only their phones. It is available for people in the European Economic Area (EEA). A bunq account gives you access to 25 sub-accounts, SWIFT/SEPA transfers, and multiple bank cards. However, you will have to pay a monthly fee when the free 30 days trial for opening the account expires.
Best for Free Current Account
Starling Bank is a neobank that boasts of having Britain’s best current account. The account can be opened and used without monthly fees; it is free. In addition, you can use your cards on international ATMs for free.
At any time and from anywhere, you can use N26 to receive, send, and manage your earnings in one app. All you need to do to enjoy its many benefits is to create a free standard account. N26 does not charge any maintenance fees. Also, it has no minimum account balance and no minimum deposit.
Get a free UK current account with protection for every money you deposit in it when you register for an account with Monzo. It also comes with the options of getting loans and overdrafts and earning interest on the money in your savings pot.
Best for Cryptocurrency Transactions
Earn interests on your Bitcoin along with a full bank account from a conventional bank in Germany when you create an account with Nuri. See this payment system as your ideal mix of a traditional bank and a crypto bank. You can use it to receive, send, transfer, and store both paper money and digital coins. It also lets you invest in crypto through a savings plan that you can schedule in the app.
Whenever you think of a challenger bank that treats cryptocurrency like it were fiat money in the hands of a traditional bank, remember Choise.com. It makes it possible and easy for you to buy, store, spend, cash out, and even exchange cryptocurrencies. It has more than 30 in-app currencies and is available in over 170 countries and territories.
Best for Sustainable Banking
Use Tomorrow to invest in that sustainable project you have been desiring to fund. This bank invests your money in ways that are not harmful to the environment. It issues one of the world’s first wooden debit cards (contactless Visa cards) to demonstrate its belief that the earth should not suffer because of banking. Up to 10,000 cherry-wood cards are produced from one tree, thus successfully leading a move towards zero-plastic bank cards.
Best for All-round Payment Solutions
Our trending best all-rounder digital payments solutions provider is Revolut. Through an account with Revolut, you can meet your banking needs such as payments, budgeting and analytics, open banking, subscriptions, gifting, donations, crypto investing, trading in stocks and shares, buying and selling commodities, pet insurance, international money transfers, etc. It is a leader in the European banking sector when it comes to the rendering of low-cost massive financial services. It is a London-based neobank with no physical branches anywhere. It is authorised by the FCA under the Electronic Money Regulations. Register an account with Revolut if you would like to take care of everything about your money in one app.
From traditional banks, through neobanks, to non-banking FinTech companies, we see a never-ending chase for innovative ways to serve individuals and businesses better. The systems in use today are commendable and the competition should continue but with more partnerships. Besides, in addition to acquiring advanced technology that can reduce costs and meet the needs of their customers better, banks and payment systems providers also need to create more sustainable ways of banking.