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682 - Finance Digest │ Financial Literacy │ Financial PlanningBy Luke Ladyman, COO and Co-founder of Cheddar

Over the past year, the payments industry has gone through some pretty incredible transformations. Businesses have invested in fine-tuning their digital experiences to honour customer expectations at every turn in their journey, starting with payments.

After almost three years of changing work and shopping patterns, consumers are now more comfortable than ever in navigating the world through a digital prism. Across all generations, consumers are adapting to the way in which they make payments, utilising contactless payments and other payment methods to complete purchases.

The expansion of ‘Open banking’ across the UK, EU and even perhaps an introduction to North America

The UK can take pride in the fact it leads the charge when it comes to the adoption of Open Banking. But as the UK economy falls into recession and the cost-of-living crisis worsens, 2022 has ended on a fairly shaky note. Having said that, it hasn’t all been bad news; this year has seen phenomenal shifts in how consumers spend and how businesses have adapted to this.

In January, the number of open banking users in the UK reached 5m, according to the Open Banking Implementation Entity (OBIE). This was a significant milestone with around 10.6% of the UK’s banking population all plugged in.

With the help of Open Banking, switching to new products has been made easier, empowering individuals into making smarter financial choices such as using peer to peer (P2P) payments apps and earning cashback on the go. And as the fear of a global recession grows, Europe and North America will look to support and future proof the optimisation of Open Banking.

The introduction of variable recurring payments (VRPs) and long-lived consents when customers link their accounts to authorised Third Party Providers (TPPs), should unlock novel solutions within the payments space for 2023.

How Gen Z continues to change the scope of fintech technology

The past year has been a very bumpy ride for Gen Z to say the least. They made it through the pandemic only to then face a cost-of-living crisis and now a recession, arguably making them the most financially insecure generation of our time.

2022 witnessed a generation frustrated by their financial situation, leading to a rise in customer expectations to ensure that fintechs work to remedy their financial and personal pain points.

This generation desires fintech services that won’t penalise them for their lack of financial knowledge or stability – expecting fintech technology to reflect this. The payments industry to this generation will not just be about how they spend their first paycheck, but will be their own personalised financial tool.

As they continue to face the most financially challenging times in recent history, Gen Z will turn to services that will make their financial lives easier. They will look to technology that will not require them to greatly alter spending habits whilst they navigate the cost-of-living crisis.

How fintechs will empower consumers to better manage their finances amidst the cost-of-living crisis

This year has witnessed solutions override legacy payment systems when purchasing goods as digital payments come to the forefront of economies squeezed by rising living costs. Fintechs have empowered consumers by using Open Banking technology to deploy financial solutions specific to their needs.

2022 has seen an increase in value and added incentives for consumers when choosing where to shop during these challenging times. We have seen a renewed push for digital currencies and frictionless banking, further placing emphasis on bank-agnostic tools that offer consumers more choice and personalised offerings – we can expect this to continue.

From savings platforms to automated bill payments, the fintech industry has had a clear and consistent impact with consumers reaping the benefits of saved time, money and increased control. Given the uncertain economic landscape, fintechs will provide a critical lifeline to millions of consumers, making adoption even more attractive.

Beyond 2022

As we approach the new year, we should expect to see a bold shift towards new hyper-personalised experiences as the payments industry continues to improve business to consumer (B2C) and consumer to consumer (C2C) optimisation, aiding the financial economy.

As digital natives, Gen Z are tech savvy enough to adapt to the changes on the horizon and will take full advantage of the opportunities to make and save extra money using Open Banking.

Our personal mobile devices will take on an even greater role in our everyday life and will determine our engagement with financial services. As a result, we know that the next year in the payments industry will be greatly shaped by technological innovation and exciting developments. Watch this space.

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