The following is a piece I wrote after my participation in a series of workshops with the team of hellohello studio. These workshops intended to foster research work on banking and financial digital products, looking for innovation opportunities for our client, Scotiabank.
Many thanks to Mike McKenna for feedback and review.
In this modern era, we are seeing a transformation in how traditional banking and the fintech industry focus on offering their users two tools that, until a few years ago, were not considered part of their service offerings: financial management and investment options.
Both services have been made easier to access and utilize over time thanks, to a large extent, to the digitization of assets and the benefits that this entails. As an example, we can see that the liquidity of a shares ownership certificate is much greater as it is traded today in a 100% electronic market than it was 80 years ago, just as moving funds from one bank account to another is much easier today inasmuch as we need not visit the bank only on the days and hours in which it physically operates.
Greater control
Said changes have also provoked a much deeper modification that relates to the transfer of control. Users can see and manipulate their assets essentially 24 hours a day, 365 days a year, without depending on brokers or open bank branches.
Also, this greater control has created a demand for knowledge about asset management: What investment options are there? How much do I spend per month? How much does a fixed-term asset yield vs. a bond? How much did I save last year? What do I spend on when I spend?
In short, we have greater control of, and therefore greater responsibility for, our assets.
Where we come from, where we are and where we are going
It seems interesting to me, then, to carry out the exercise of briefly reviewing how the relationship of users and their investments within the context of the financial ecosystem across different generations. In this way, we can draw conclusions that allow us to think about possible future scenarios to consider in the design of financial services.
Baby Boomers and Generation X
The so-called “traditional investments” are those which, to a certain extent, became popular for these generations. (Compared to today’s standards, many people from these generations were left out of participation.)
The instruments available to them were stocks, corporate bonds, government bonds, and ETFs, which were always limited to those issued in the investor’s country of residence.
Millennial and Z Generations
For these generations that have one foot in the world of the Boomer and another in theat of the Alpha (which is described later), traditional banking and fintech are offering them the possibility of investing in a simplified way in “classic” products but in a fully digital way: commodities (Paxos Gold, Agrotoken), corporate shares (Revolut, Ualá), ETFs (Uphold), and cryptocurrencies (Prex).
Thanks to blockchain technology, commodities have become more accessible, since they can be purchased fractionally, without the obligation to buy the equivalent of an ounce of gold or a ton of wheat.
In the case of stocks and ETFs, it is now possible to access to a fraction of titles that were previously not possible to obtain for two reasons:
- They did not operate in the country where you resided.
- The full price had to be paid.
Alpha Generation
This generation sees, and therefore will demand in the future, investing assets as something natural because they will be accustomed to the crypto ecosystem where DeFi options are many and available to anyone, regardless of age or credit profile. For them, the purchase and sale of digital assets for a premium is something common (NFTs case). The monetization of all activities is the logical path (which has already begun), and the younger generations (younger every day, in fact), access the possibility of earning money, streaming, participating in play-to-earn games (Axie Infinity case), or monetizing in different ways than what was often done for free when creating content on and for the internet.
This generation adds two aspects that were not a possibility for the previous ones in terms of its conceptualization and understanding:
- Full control of one’s assets.
- Act beyond jurisdictions.
1 – Full control of assets
Although today, as previously noted, the control we have over our assets is much greater, we continue to depend on banks, private companies or, ultimately, centralized institutions, which are in possession of them.
Now, those who participate in the crypto ecosystem have the possibility of operating within 100% decentralized protocols that give 100% control and 100% responsibility to the user.
2 – Beyond jurisdictions
This experience has already become part of everyday life in many ways.
For example, when four people meet on a work video call, where do we really meet? Where does that conversation happen? In what jurisdiction is what is produced generated?
When an entrepreneur in Asia forms an LLC in the USA producing from their home, they will pay taxes from one territory on profits from a company located in another. Where then, does this company exist?
Likewise, the Alpha generation will naturalize asset movement. First, by using assets that do not respond to a particular jurisdiction, such as Bitcoin or Ether. And second, without contemplating jurisdictional barriers at the time of transaction; that is, without commissions to be charged, without taxes, and without intermediaries.
Current situation and a look at the near future
Traditional banking and fintech companies are focusing on the Millennial and Z generation, who are their largest customer base today, but as product designers, we have a great opportunity to prepare and gain ground if we think about the Alpha generation. For them, both models (digital banking and fintech) will be outdated in their current state and will not fit into their way of life unless both business models know how to adapt.
As initial ideas, we could establish that:
- Investment options are a must
This is expected and sought after by almost all generations. Otherwise, a bank will be seen only as a deposit of money where it loses value day by day. - The trend is to digitize as many assets as possible
It is expected to be able to control different types of assets in the same place. - Transfers must be linear and without intermediaries
That is, in the most direct way possible and involving the fewest possible number of agents in the process. - Total control of what is produced
Those who obtain income from the production or provision of services will expect, along the same lines as the previous point, to obtain 100% of the profits without intermediary fees.
Many of the things mentioned above may come to pass, perhaps in the mid or even long-term future, but other aspects are essential to be taken into account today in order to design products and services that truly add value and meet the needs of a modern, developing society.