Unlocking the potential:
How mid-sized banks are empowering Financial Participation through technology and collaboration
Financial participation remains low in Europe, with only around 10% of banking clients investing their money. However, surveys show that 89% of people recognize the need to prepare for their financial future. Despite this gap, we see several trends that are driving financial participation upwards.
First trend: Growing digital literacy & financial technology
The first trend is the growing digital literacy and the use of technology in finance. Large banks are witnessing an increase in the usage of their mobile banking apps and online banking platforms, especially in the area of investing. Moreover, the Retail Investment Strategy of the European Commission puts retail investors at the center of the Capital Markets Union Project, encouraging all financial services providers, big or small, to improve the digital accessibility of their services, including their investment offerings. Mrs. Natasha Cazenave, executive director of the European Securities and Market Authority, welcomes initiatives that empower retail investors and foster their participation in EU capital markets, not just to offer them affordable options tailored to their preferences and help them save for their retirement, but also to contribute to a more sustainable economic model. Encouragingly, we see some successful use cases where technology has helped to support financial participation.
One example is micro-investing, where retail banks round up digital payments and put the difference in a savings account or investment. By turning saving into a natural habit, this approach increases the upside potential while mitigating risk. However, a challenge is presenting this on a smartphone screen in a way that complies with regulations and remains user-friendly. We have successfully integrated micro-investing in multiple MiFID jurisdictions with great commercial success, using our expertise to help clients give their consent to rounding payments without human encouragement or advisor assistance.
Prepare for retirement
Another example is the use of technology to encourage people to prepare for retirement. The institute for investor research at Amundi reported a project that allowed employees to invest in a pension fund with support from a “robo advisor” that watches over the investment, signals opportunities to rebalance, etc. The results of the project confirm that more employees invest for retirement, they consult their investment more often, they have a higher tendency to rebalance in line with a model portfolio, and, as a result, they see risk-adjusted performance increase. everyoneINVESTED offers multiple APIs that execute screenings on large amounts of portfolios and formulate personal trade proposals that improve portfolio quality and investor retention.
Second trend: Move towards Open Banking
The second trend that is driving financial participation is the move towards open finance, which benefits small and medium-sized banks in particular, allowing them to accelerate financial participation. Many banks lack the skills, scale, or means to develop the required capabilities in-house. As a result, there is a growing willingness to consider fintech collaboration and strategic partnerships, amplified by the belief that open finance will realize efficiency gains. everyoneINVESTED is well-positioned to be a trusted partner to outsource part of the digital process of investor profiling, investor recruitment, and investor retention.
In short, we have a positive outlook on the ambition to get everyone invested. First, technology enables financial participation that supports investor protection. Second, regulatory initiatives call for collaboration across the industry. Ready for more? Tune into or next webinar where Jurgen Vandenbroucke will detail both parts of this bright future.