In the wake of growing globalisation and digitisation, the delivery of financial services is going through a series of transformations that are shaping banking as we know it. This evolving environment has created a fertile ground for innovation that has led to the rise of new entrants challenging many well-established incumbents.
FinTechs have been disrupting the retail banking space for some time now. These innovative and typically more agile financial services providers tend to offer less expensive (or even free) and more accessible solutions that have the potential to supplement and even gradually replace those of well-established players.
Arguably a lack of foreign exchange charges has been a key driver for the uptake of digital banks. Recently, we’ve seen traditional players attempt to catch up with similar propositions, such as the FX-fee free HSBC Premier World Elite Mastercard in Canada or the Santander Zero Credit Card in the U.K..
However, FinTechs with their cutting-edge technologies, more agile structure, lack of legacy constraints, and innovative mindset (including a reduced fear of failure), are increasingly oriented towards offering superior solutions with unique value propositions targeted towards global citizens. These individuals often have very specific banking needs and require solutions capable of eliminating geographical boundaries.
When it comes to accessing banking services, each country and bank can have their own unique procedures and requirements, which often causes headwinds for global citizens looking to open bank accounts, apply for credit cards, receive local payments and be granted convenient exchange rates. Nonetheless, it is clear that the way customers prefer to interact with their financial services providers is changing. This trend has enabled FinTechs to tap into the personal finance management space.
As a result of this, we have seen an array of new solutions being launched to improve global citizens’ financial well-being and transforming how this group saves, spends, and manages their finances.
FinTech call outs
The digital bank Revolut particularly stands out in terms of its international focus and offering. The FinTech positions itself as the banking alternative for global citizens and aims to become the go-to account for individuals that need to manage and move their money around the world. The mobile account offers free international transfers as well as the ability to exchange money with no additional fees in 25 currencies. The company started operating as a foreign exchange service and now caters to over 1.5M customers with plans to further expand globally. Additionally, Revolut has started offering a broader array of services such as loans and, more recently, geolocation-powered travel insurance, designed to meet the needs of its customers’ global lifestyle.
N26, a fully licensed bank founded in Germany, is now operating in 17 countries across Europe. The bank positions itself as a borderless financial institution allowing customers to shop around the world or transfer money abroad in real time at competitive rates with no hidden fees. N26 is now expanding through collaborations with other well-established FinTech players and is bringing a range of additional and innovative features to the app, such as an international money transfer service via TransferWise, investment portfolio management powered by Vaamo and peer-to-peer lending through Auxmoney. Additionally, the company has started to target wealthier global citizens offering even greater benefits to its premium Black users such as: dedicated customer service, worldwide travel insurance, no foreign withdrawal fees, and competitive exchange rates.
Denizen, an online bank “founded by expats for expats” is also worth highlighting. The FinTech positions itself as a premier account for global citizens and claims to be the world’s first borderless global solution. Their mission is to simplify banking for individuals living or working abroad by not charging any international fees, avoiding long delays to access money, or juggling accounts in multiple places. The solution claims to offer minimum FX rate surcharges, hassle-free access of funds and seamless integration of all financial accounts.
Wealth management is another space where FinTechs are developing innovative solutions, ultimately to help global citizens squirrel away funds for the future. Raisin, an online marketplace for savings products, allows customers to start ‘saving without borders’ and access attractive fixed fee deposits throughout Europe. The FinTech partners with N26 and claims to allow its depositors to open savings accounts and access higher rates than any bank within the EEA.
These solutions are proof that FinTechs have what it takes to address the banking hurdles of a wide spectrum of customers, ranging from the digitally savvy international students to the more specific needs of pensioners.
These innovative companies have started to provide cheaper and faster alternatives for global citizens and are willing to further eliminate the pain points of their international customers by offering additional services capable of enhancing their overall banking experience and creating intelligent automations between banks.
Incumbent financial institutions are therefore urged to respond and offer more bespoke solutions capable of solving their global customers’ needs as well as maximize their assets. Collaboration between FinTechs and incumbents could provide substantial benefits in this space and has the potential to become the new frontier of banking.
About this blog post
This blog post is part of KAE’s latest FinTech series (‘FinTech Guide for Global Citizens’) that maps the key trends and calls out variety of FinTechs and solutions meeting the needs of today’s global citizens.
Our next post will look more closely at how FinTechs are addressing the needs of global citizens in the payments space.