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Recommended reading: the future of banking

10/06/2014 01:00

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This week we propose two interesting articles on the future of the financial system, specifically an analysis of digital payments and a second one on the new competitors of traditional banks: technology providers like Google, Apple and Amazon.


"The Opportunities of Digitizing Payments" is an analysis by The World Bank that addresses the current situation where over 2.5 million adults have no official bank accounts. Specifically, 80% of adults living below the poverty line have an account. This is why the report looks into the benefits of digital payments. It points out that governments that promote digital payments have greater transparency, since they have digital records of payments and collections, and cases of "phantom recipients" are avoided.

The recipients of digital payments themselves also benefit, since costs are lower and transactions are more convenient: for example, in rural areas people do not have to travel long distances to make a payment. In short, digital payments are more efficient than traditional ones and according to this report they can "reduce the levels of corruption, violent crime and government costs".

New forms of competition and changing customer behavior are the two new fears of banks. An article by Tom Groenfeldt in Forbes entitled "Banking vs. Google, Apple and Amazon" analyzes the new entry of these players in the financial system.

Banking is responding to this 'threat' with heavy investments in innovation, but it is only a high priority for 16% of banks. In fact, 29% of bankers in the microfinance sector claim to be concerned about the competition of these technology providers. Some of the banking services they offer (such as Simple, T-Mobile, Moven…) are beyond the scope of banking services.

Lastly, we recommend these computer graphics on knowledge-based authentication. It is a new security measure designed to identify end users who access online content through a series of questions whose answer is only known by a specific person.