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Personal Finance Survey Reveals that 67% of Individuals Trust Robots More than Humans to Manage their Investments

We’ve been trusting robots to manage money more than we “trust” ourselves, according to a recent study from Oracle and personal finance specialist Farnoosh Torabi. The global survey of over 9,000 individuals across 14 different countries revealed that the COVID-19 pandemic has “increased finance-related stress at home and in business, and people around the world are looking to AI for help.”

The Oracle study found that financial anxiety and sadness among individual consumers and business owners or leaders “more than doubled (increased by 103%) in 2020.” Notably, the study revealed that 67% of people “trust robots more than humans to manage finance.”

Around 85% of survey respondents “believe robots will replace finance professionals and 46% believe it will happen in the next five years.” Around 85% of business leaders “want help from robots for finance-related tasks.”

People are also “rethinking the role and focus of corporate finance teams and personal financial advisors,” according to the research.

Other notable results from the survey include:

  • Consumers want personal financial advisors “to provide guidance on major purchasing decisions such as buying a house (45%); buying a car (41%); and planning for retirement (38 percent).”
  • 60% of consumers “say the pandemic has changed the way they buy goods and services.”
  • 72% of consumers “say the events of 2020 have changed how they feel about handling cash, with people feeling anxious (26%); fearful (23%); and dirty (19%). More than a quarter (29%) of consumers now say that cash-only is a deal-breaker for doing business”.
  • Businesses have been “quick to respond as 69% of business leaders have invested in digital payment capabilities and 64% have created new forms of customer engagement or changed their business models in response to COVID-19”.
  • 51% of organizations are “already using AI to manage financial processes, compared with 27% of consumers”.
  • 87% of business leaders “say organizations that don’t rethink financial processes face risks, including falling behind competitors (44%); more stressed workers (36%); inaccurate reporting (36%); and reduced employee productivity (35%)”.

As noted in the update shared with CI, managing finances can be challenging during the best of times, and the financial “uncertainty” due to the COVID-19 pandemic has further exacerbated financial challenges at home and at work, according to Farnoosh Torabi, personal finance expert and host of the So Money podcast.

Torabi added:

“Robots are well-positioned to assist – they are great with numbers and don’t have the same emotional connection with money. This doesn’t mean finance professionals are going away or being replaced entirely, but the research suggests they should focus on developing additional soft skills as their role evolves.”

Research Methodology

Research findings are “based on a survey conducted by Savanta, Inc. between November 10 – December 8, 2020 with 9,001 global respondents from 14 countries (United States, United Kingdom, Germany, Netherlands, France, China, India, Australia, Brazil, Japan, United Arab Emirates, Singapore, Mexico and Saudi Arabia)”. The survey “explored attitudes and behaviors of consumers and business leaders towards money, finances, budgets, and the role and expectations of artificial intelligence (AI) and robots in financial tasks and management.”

Juergen Lindner, SVP, Global Marketing, Oracle, remarked:

“Financial processes in our personal and professional worlds have become increasingly digital for many years and the events of 2020 have accelerated that trend. Digital is the new normal and technologies such as artificial intelligence and chatbots play a vital role in managing finance. Our research indicates that consumers trust these technologies to accelerate their financial well-being over personal financial advisors and business leaders see this trend reshaping the role of corporate finance professionals. Organizations that don’t embrace these changes risk falling behind their peers and competitors; hurting employee productivity, morale and well-being; and struggling to attract the next generation of AI-empowered finance talent.”

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Fintech Adoption in Pakistan and Digital Transformation Supported by Local Fintechs Could Improve Tax Collection: PM Imran Khan

The team at Islamabad-based Fintech firm SadaPay has been introducing innovative and appealing financial products and services that are focusing on younger consumers in Pakistan.

SadaPay is offering black, sleek premium spending cards which may be comparable to some of the cards offered by European Fintech challengers such as Monzo or Starling.

SadaPay has also launched a Founder’s Club and allows its clients to get their hands on these premium black cards if they can get 10 of their friends or colleagues to register to use the company’s Fintech services.

SadaPay, which was recently approved by the State Bank of Pakistan to launch pilot operations, points out that Payoneer’s Global Gig Economy Index revealed that Pakistan was among the top freelance markets, even surpassing India, Bangladesh and Russia last year (following the COVID-19 outbreak).

The report from Payoneer confirmed that the United States saw the most growth at 78%, followed by the United Kingdom at 59%, Brazil at 48% and Pakistan following closely at 47%.

In Pakistan, there’s also a young workforce that is increasingly using digital banking and online payments services like EasyPaisa and JazzCash to settle daily transactions. The COVID-19 pandemic has accelerated digital transformation in Pakistan and neighboring countries like India and Bangladesh as well.

Last month, Pakistan’s Prime Minister Imran Khan said that the Digital Pakistan initiative would help move the country away from a cash economy, which has become even more relevant in a post COVID world.

Prime Minister Khan had stated in January 2021 that the Digital Pakistan initiative would help the nation transition to a more modern economy. The premier, whose comments came at the launch ceremony for the ‘Raast‘ payment system in Islamabad, noted that the initiative could potentially play a key role in eradicating poverty in the country with a GDP of nearly $400 billion.

The Prime Minister remarked:

“Cash economy is an obstacle for the people.” 

He added that digital transactions will help Pakistan on its journey to prosperity. He also pointed out that tax collection is extremely low in the country and that out of the 220 million residents, just 2 million are paying their taxes.

He further noted:

“Only 3,000 Pakistanis pay 70% tax.” 

Khan explained that the low tax collection rate has been a significant challenge or obstacle in the country’s ongoing development.

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Fintech Professional Says Challenger Banks are Disrupting Banking Sector in a “Big Way” by Improving Customer Experience

Mr. Potter Banker Banking (1)

Mr. Potter Banker Banking (1)Last year, we saw many banking challengers offering services to customers who might not have been satisfied with their traditional bank. Many more people also began to use online banking services due to the COVID-19 pandemic which forced many physical business locations to shut down.

Marwan Forzley, Co-Founder and CEO at Align Commerce, a payment service provider for global commerce, notes in a blog post published by Payments Source that challenger banks are still quite small when compared to traditional financial institutions. But they’re “disrupting” the banking sector in a “big way” by changing “the fundamental and antiquated experience we’ve come to expect.”

Forzley points out that Deloitte’s “DNA of Digital Challenger Banks” report states that “challengers have developed a product offering and channel experience that targets the points of the value chain where incumbents’ weaknesses are most exposed and often not easy to fix.” In 2020, we saw Fintech challengers (like Current) offer certain services that cater to the financially underserved — such as SMEs, Millennials and underbanked consumers, Forzley confirmed.

He added that digital-only banks (like Revolut) have launched services that specifically aim to serve corporate or business clients. They may offer advanced tools and features (for example, access to working capital, accounting integrations, online wallets, and payment scheduling). These tools may be accessed from a laptop or mobile device — “without the processes, complexities or red tape that incumbents are known for,” Forzley claims.

He also mentioned that there’s a “wide open market with plenty of opportunity not just for challenger banks but for financial technology as an industry to set themselves apart from incumbents to gain market share.”

In 2020, we saw an “unprecedented” level of investment into Fintech firms, Forzley noted. He pointed out that the opportunity for growth within the payment and banking sector is driven by the need to solve or address clear problems and develop “tech-forward solutions” that are “readily available” to serve individuals and companies. He claims that VCs and incumbents are interested in funding “innovative, agile products and services that improve on the speed, accessibility and transparency issues that are widespread throughout traditional financial institutions.”

He concluded:

“[The] winners will be determined by how novel their offering is. In order for the leaders in the space to survive against incumbents and against each other, challengers will need to focus on ensuring their services are more innovative and different compared to what exists today. If the service is going to yield minor incremental changes, it won’t be enough for the challenger to truly take off. The services that will do well are the ones providing a fundamentally different and forward-thinking customer experience.”

As reported recently, digital banks and Fintech challengers must show they can generate profits, because investors are expecting returns.

Investors have been pushing banking challengers to show them how they can generate sizable profits by effectively monetizing their products and services. Industry analysts expect that the neo-banking sector will have to consider consolidation opportunities and seriously begin to focus on achieving profitability in a post COVID environment.

As covered, Fintech adoption is on the rise globally with over 250 digital banks operating in major financial markets, according to a new report from Exton.

The report noted:

“On their quest for monetizing customer relationships neobanks have learned a first lesson: payment transaction fees, premium account subscription fees, or open banking commissions from brokering 3rd party services will in most cases not be sufficient to generate profits or breach beyond operational break-even. Our expectation much rather is that Neobanks will need to offer additional products to jump the gap to sizable profitability.”

The report added:

“Irrespective of which path neobanks will take, we remain convinced that they will need to shift into profitability mode quickly as investor patience will not be unlimited. But for those that select the paths right for them, stay focused on it and grow up as an organization, the future remains bright and full of opportunities.”

Exton suggests that some Fintechs or neobanks may want to consider offering digital or lending services which should help them diversify their business. Financial technology firms can also look into developing their own super app or offer investment services to the mass affluent market, Exton noted.

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Financial Services Professionals Say Lending Sector to Take A Year or Longer to Recover to Pre-COVID Levels: Survey

The COVID-19 pandemic has accelerated the shift to digital with financial services, according to a recent report from TransUnion (NYSE:TRU), a financial services data platform and credit report provider.

The report notes that the Coronavirus outbreak sent “shockwaves” through the financial services sector and has “challenged the way lenders have historically operated.” TransUnion also mentioned that as more commerce begins to move to all-digital platforms, “empowered” consumers will have even more power or control in today’s global, technology-driven economy.

The company’s report pointed out that 40% of consumers are now using all-digital channels more frequently than before the pandemic began. The increase in the use of digital services is taking place at a time when 60% of consumers say that “the majority of their financial transactions are conducted via mobile applications.”

The report also revealed that one in three consumers are “engaging with their preferred financial institution multiple times a week via digital channels and roughly two in three are utilizing such platforms a minimum of once a week.”

Liz Pagel, SVP of consumer lending at TransUnion (and moderator of the Future of Lending roundtable discussion recently held by the company), stated:

“The pandemic has acted as a catalyst for lenders to adopt new technologies and stay competitive in this changing environment. A strong digital presence is now all but required to meet the evolving needs of consumers. Financial institutions that prioritize digital innovation to optimize their consumer interactions are likely to see the most upside over the long-term.”

Although the lending sector is going through a period of recovery following COVID, organizations are beginning to make plans for the future, the TransUnion team confirmed.

Around half of a group of 20 financial services professionals recently stated (during a Summit organized by TransUnion) that the lending sector could take at least a year or longer to “return to pre-COVID levels.” Despite these challenges, the financial services executives said their companies would be making additional investments in improving their digital capabilities because of changes in the business environment due to COVID.

Pagel added:

“Consumers are now accustomed to receiving highly customized retail offers through online channels. As a result, they now have higher expectations for their interactions with lenders. Lenders who integrate into the purchase moment, or who provide customized, relevant credit offers are seeing outsized growth.”

She also mentioned:

“As retail and financial services interactions continue their accelerated shift to online channels, lenders will need to continue to invest in seamless engagement, underwriting and servicing experiences – companies who can make every consumer touch point customized and smooth will win in the future.”

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Indonesian Fintech Investor, BRI Ventures’ CIO Says Company will Use $250 Million Fund to Create “Real Value,” Not Just High Valuations

Indonesia is one of Southeast Asia’s largest markets for digital platforms and services. The country offers an attractive business environment and opportunities for investors who are interested in projects that aim to take advantage of fast-growing economies.

BRI Ventures, the investment division of Indonesia’s oldest bank, BRI, has a $250 million fund that it plans to allocate toward the development of initiatives that can create real value for the nation’s residents.

In statements shared with KrAsia, William Gozali, CIO at BRI Ventures, noted that his company believes in “real value” creation and they aim to become “strong value-add investors” for their portfolio companies.

BRI Ventures is a Jakarta based venture capital and private equity firm that’s supported by Bank Rakyat Indonesia. BRI Ventures is established as an independent business entity with its own funding processes.

Gozali noted that the VC company focuses on businesses that are generating consistent revenue and also those initiatives that can continue to grow their operations. He explained that for BRI Ventures, revenue means “validation.” He also mentioned that when people or organizations truly value your products and services and when they value your brand or company, then that’s when they’re willing to part with their hard-earned money. This is a sign of “real value creation,” Gozali said.

He also clarified that there can be times when valuation merely reflects the “perception of value, the future.” However, validation-revenue means “the real value created now,“ Gozali noted.

He told KrAsia that BRI Ventures is mainly focused on Fintech, education, agriculture, retail, transportation, and healthcare related businesses. The VC firm has made strategic investments in digital wallet provider LinkAja, SME-focused Fintech firm PayFazz, and peer to peer lending platforms Investree and Modalku.

Nicko Widjaja, CEO at PT BRI Ventura Investama (BRI Ventures), a subsidiary of BRI, had stated (in late June 2020):

“In today’s digital tech business ecosystem, the landscape has shifted from growth at all cost, to sustainable growth. The name unicorn has been adapted from Silicon Valley, which might no longer sit well with today’s ecosystem. Indonesia needs Sembrani, a symbol for Indonesian start-ups.” 

In May 2020, BRI Ventures (along with other firms) invested in Fintech firm Nium. The company said it would use the funds to support its product development efforts.

BRI Ventures had also launched Dana Ventura Sembrani Nusatara (Nusantara Venture Capital) in Jakarta on June 24, 2020.

The company will offer convenient access to venture capital for digital technology and Fintech firms, including SMEs.  Dana Ventura aims to accelerate the growth of local start-ups by offering digital technology-enabled products in offline and online environments.

Dana Ventura will mainly be funding seed-stage and Series A ventures.

Widjaja had noted (earlier this year):

“The philosophy behind BRI Ventures investment is ‘value over valuation’ in which our focus is seeking businesses with strong fundamentals. The funding will be channeled to start-ups that already produce products, have income from their operations and have a clear business strategy toward profit.”

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