Randall Castillo Ortega of RACO Investment discusses upcoming financial investment trends in 2022

The banking sector is looking for a way to take advantage of the experience gained during the COVID-19 pandemic period to promote digital banking with innovation that allows it to continue to achieve significant technological progress and in terms of business models. However, not only the circumstances of COVID-19 have maintained a process of forced change in the banking industry, but also the rise and consolidation of technology itself allows the consolidation of more profitable, efficient and agile businesses as a result. of digital transformation. . Randall Castillo Ortega, the founder of the SME investor RACO investment in Panama and Costa Rica, provides an overview of the evolution of the financial sector due to new innovations.

Cloud adoption will be defined by a better overall technical approach (which includes different modalities of private, public, hybrid, virtual or community cloud as a whole) so that banks enjoy the broadest benefits of each Tool Cloud in an environment. integrated. a way that allows them to quickly and cost-effectively add new digital services, products, channels and applications.

Banking as a Service (Baath) enables banks to monetize their products and services through consumable APIs for third parties. Explains Castillo, The BaaS platform model allows FinTechs and third parties to build financial offerings on top of a regulated banking infrastructure, and banks to share and monetize data and infrastructure, and co- create new products with a faster time to market.

Payment as a service (PaaS) is becoming popular. Banks and financial institutions are outsourcing their payment platform technology and operations to drive digital innovation and stay relevant in a competitive environment. According to Juniper Research, the number of open banking users is expected to reach more than 40 million users by 2021.

The future points to an increase in sustainable lending, as central banks and regulators have fully recognized the severe macroeconomic consequences of climate change. Funding non-green projects will increase their cost, with higher reputational and regulatory risks for businesses, focusing on climate risk management, adoption of green operations, and green product development.

The digitization of the financial sector will continue to involve the closure of offices and the transfer of processes to the digital capacity network, leaving the human interactions for the banking segments to individuals and businesses. In contrast, digital banks will continue to experiment with a mixed or hybrid model to continue winning customers. We will thus witness the emergence of the next generation of digital banks in markets such as Latin America, Singapore and Hong Kong keen to introduce a better human experience in their digital interactions to gain trust and generate emotional connections with them. clients.

Traditional retail banks will need to differentiate themselves from their fintech and big tech competitors to avoid tight margins, credit losses and the impact of slowing economies. The best possible outcome is to focus on client-centric advice to gain their trust with radical transparency in banking services.

Predictive analytics and personalization are great tools for payment companies to examine security, compliance, and operational nuances, and big data has the potential to lead to hyper-personalization of payment methods with experience. personalized. The use of artificial intelligence and machine learning also generates personalized websites, real-time financial recommendations and a higher level of testing and learning capabilities to benefit consumers, Castillo adds.

Earlier metrics, such as credit quality, that led to losses in the banking industry will be replaced by profit metrics, making smart data-driven credit management the best performance differentiator. To increase profitability, banks will also need to be smart and aggressive in meeting the demand for new credit extensions.

Globally, cash use has declined by around 6%, a trend that promises to continue to reach 30% and 40% of current levels in Europe, and then accelerate as digital currencies of central banks will be available. By 2030, the majority of cash transactions are expected to be done only through cards and digital payments, allowing consumers to bank without branches.

The launch of Google Plex bank and Apple’s banking proposal for credit cards will take the West to the digital lane without apps for financial institutions that will move B2C banking to B2B2C banking. This service offers simple, fluid and personalized digital participation.

The widespread emergence of a new type of digital regulator where central banks will seek a balance between regulation and stimulation of innovation. Global monetary and financial conduct authorities are already prioritizing data innovation centers and regulatory sandboxes to support national innovation agendas.

Cyber ​​security and data privacy will become a Unique Selling Proposition (USP) for many financial institutions and large tech organizations. Financial institutions will be the place where the identities of consumers are stored, who will be the final owners of their identities. Banks will be responsible for complying with increasingly stringent privacy, security and data protection regulations.

The threats faced by institutions in the area of ​​money laundering expose them to serious image, legal and operational risks. To avoid them, it is necessary to automate all the controls and the use of powerful analysis tools.

About RACO Investissement

RACO Investment is a financial investment company serving small and medium-sized businesses in Panama and Costa Rica. It was founded by Randall Castillo Ortega, an expert financial advisor who has his roots in the import and export industry in Latin America. The company has helped many startups find the financial support they need to get started, and has also provided bridging loans to help those looking to restructure or improve their operations.

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