Although financial participation continues to linger at around 10% among European banking clients, a stark contrast to the 89% of individuals acknowledging the importance of financial preparedness for their future, several emerging trends are inspiring optimism. These trends are pushing financial participation to new heights.
WealthTech company everyoneINVESTED, recently explored how financial institutions are boosting financial participation through technology.
It stated that the rising digital literacy and growing integration of technology in the financial sector signal the first of these trends. As seen in the surge of mobile and online banking usage, particularly in investment operations, large banks are increasingly tapping into the benefits of digital platforms.
Furthermore, the Retail Investment Strategy unveiled by the European Commission actively encourages financial service providers to enhance the digital accessibility of their services, investment offerings included. This push aligns with the Commission’s goal of making retail investors the heart of their Capital Markets Union Project.
Embracing this drive, Natasha Cazenave, executive director of the European Securities and Market Authority, has voiced support for initiatives that embolden retail investors and stimulate their participation in EU capital markets. Not only do such initiatives present an array of affordable, custom-tailored options for retail investors to help secure their retirement, but they also contribute to the development of a more sustainable economic model.
Micro-investing stands as one successful application of technology to boost financial participation, everyoneINVESTED explained. This practice involves rounding up digital payments and depositing the surplus into a savings or investment account, fostering a habitual saving mindset. Despite the challenge of adhering to regulations while maintaining a user-friendly smartphone interface, our expertise has allowed us to successfully incorporate micro-investing in various MiFID jurisdictions.
Technology is also proving instrumental in promoting retirement planning. An instance of this was seen in a project by the Amundi investor research institute. Employees were facilitated to invest in a pension fund, supervised by a robo-advisor that alerted opportunities for portfolio rebalancing. The outcome showed that technology-driven retirement planning lead to increased investment, more frequent investment reviews, an elevated propensity for portfolio rebalancing, and improved risk-adjusted performance.
The second major trend pushing financial participation is the shift towards open banking. This trend is particularly beneficial for small and medium-sized banks, enabling them to hasten the pace of financial participation. Due to a lack of skills, scale, or resources to build in-house capabilities, many banks are considering FinTech partnerships and strategic collaborations. This interest is further fuelled by the potential efficiency gains promised by open banking.
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