The future of money and financial services

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The alert I just heard turned out to be from Finn, my personal financial AI robot in the cloud. I realized he knows where I am via the mobile network. He also knows I’m about to take a break here at Ericsson and takes this opportunity to get my attention. It’s a little irritating, but in general Finn’s actions reflect what I want to happen with my financial organization. Overall I’m happy with this AI bot and how financial transactions can be done these days.

I still remember the situation almost 10 years ago when most transactions could take days to complete. Fortunately, the FinTech industry has seized the opportunities offered by mobile networks, including reliability and ubiquitous connectivity. This made it possible to abandon the old, non-digital and isolated solutions and replace them with fully digital and fully connected solutions. With all the new mobile money services and other fintech solutions available, it’s fair to say that today, mobile infrastructure is the infrastructure for digital currency.

I remember the main turning point for financial services was the move to ITS solutions. Instant Transaction Services, or ITS as everyone calls them, arrived in the mid-2020s. They have helped strengthen the mobility network’s presence around the world with their robust user authentication methods. With the built-in security and regulatory controls of a mobile network, these new fintech solutions could process transfers and purchases instantly.

Secure and reliable networks – the backbone of the future fintech

All of these developments happened gradually, but one of the reasons businesses, governments and consumers were willing to use fintech solutions was the perceived quality and trust of the networks that supported them.

For example, standardization not only laid the foundation for interoperable, multi-vendor solutions, but also ensured network security.

When developing new services, fintech’s biggest challenge had its roots in national and regional differences between financial and banking infrastructure. These included differences in technical infrastructure, organizations involved, and legal requirements.

On the one hand, this has made it difficult to deliver simple overall fintech solutions. On the other hand, players such as credit card companies, service providers and global device manufacturers have had the opportunity to bridge these silos and create new businesses as enablers addressing this complexity by backstage.

The use of mobile networks has made it easier for the creators of network platforms to seize new opportunities. With more processing power and the use of advanced AI technology, it has become technically possible to connect financial silos directly to a network platform and remove some enablers. It has also enabled the creation of new solutions which more or less bypassed the existing infrastructures ten years ago. The creation of automated transaction processing based on smart contracts using blockchain technologies was a prime example.


The potential of fintech and the network platform

The fintech industry has benefited from the potential and efficiency of a layer in network platforms specifically designed for fintech services. Fintechs also got better tools like confidential computing, homomorphic encryption, which allow the processing of protected and even encrypted data. They in turn provided better support to perform cloud processing of sensitive data or digital registers to build trust among many users.

But as Bitcoin proved over a decade ago, if we can break free from existing infrastructure, technically simple approaches can create breakthrough solutions that people are willing to use even if they are new. Putting the full power of the mobile network and network platform behind fintech solutions would be a powerful force for innovation, especially since the focus is on transferring money instead of just owning money. ‘money.

Quantum computing is another technology that can drive innovation and entirely new solutions. A challenge here is the realization of quantum memories that store quantum states in a quantum computer. With advancements in quantum memories, the vision of quantum money is getting closer to reality here in 2030, and would give us truly unclonable money.

Mobile money and fintech are thriving

The new fintech solutions that we have today in 2030, like IST, have been developed and built on a solid foundation. Mobile networks reached (and still do) more people than most governments. In many places, fintech solutions based on mobile networks are among the only functioning infrastructures of the company, which is a stark difference from 2021, when there were still around two billion people considered financially excluded. or without adequate access to financial services.

This has provided a solid foundation for new financial technologies, as most people have access to a mobile phone network in some form or another. If you have a mobile account, you have established financial mutual trust with the communication service provider (CSP) and you have crossed a crucial threshold in terms of joining the financial system.

In practice, this means, for example, that if you have a mobile account, you already have a bank account. You don’t know it yet. There is also anecdotal evidence that ten years ago people used mobile units as an unofficial global currency for remittances. An emigrant could easily buy mobile units on behalf of a relative in their home country as financial support.

CSPs have played a key role in providing financial services to many unbanked or underbanked people, as they already have a relationship with them through telecommunications services (mainly voice and SMS services).

Specifically in Africa and Asia, the growth in the number of mobile money subscribers has been extremely good. Already in 2021, there were, according to the 2021 report of the GSMA, more than 1.2 billion registered mobile money accounts. On a monthly basis, there were 300 million per month active accounts. Over $ 2 billion was processed daily by mobile money providers.

Likewise, I remember that 10 years ago, in 2020, Ericsson’s mobile money platforms reported that they had over 250 million registered accounts, more … than 53 million per month active and processed accounts about $ 850 million per day.

During the same period, the Ericsson Wallet platform was a large and dynamic ecosystem consisting of around 500,000 agents, over 100,000 merchants, many bill aggregators and individual billers, government payments, loan providers. and savings, insurance providers and more than 12,000 developers who used APIs provided by the platform.

In a 2021 report from the Ericsson ConsumerLab report, based on an in-depth study of consumers in six countries in sub-Saharan Africa, researchers found that mobile money use had more than tripled in the countries studied compared to 2016. .

As in most countries, the COVID-19 pandemic in the early 2020s led to the digitalization and adoption of mobile money in sub-Saharan Africa. Half of consumers in the region said they had increased their use of mobile money. Up to 75 percent were aware of the benefits of mobile money as a way to avoid infection during the pandemic, instead of using cash.

Mobile networks have become the de facto infrastructure of digital currency

Over the past ten years since 2020, successful service providers in this field have been able to build an organization with the processes and technology to deliver financial services to their subscriber base. They secured and maintained their positions, as they understood how to respond to challenges posed by regulatory authorities such as central bank digital currency (CBDC) and position new technologies such as blockchain and other cryptocurrencies. , new types of competitors and the need for new business models. They understood how the future of money and financial services was changing and what role they could play.

After ITS, the use of AI in society (including mobile networks) laid the foundation for smart services like my robot Finn, which helps me and my family solve our earthly problems like the payment of our monthly bills and loans. Finn also helps me send money to my parents in Singapore every month, securely and in real time. Like I said, I feel happy with Finn, and I’m currently wondering why he now needs my attention. It is likely that there has been a change in some rules along the way that my financial transactions will follow. I should probably go on and fix it.

This article was written with the cooperation of several Ericsson colleagues, including Firooz Badiee, Kumar Balachandran, Ali Khayrallah, Peter Rinderud, Heraldo Sales-Cavalcante, Gaspar Wosa and Gemma Vall-llosera.

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