The digital economy is now the single most important driver of innovation, growth, and job creation, growing two and a half times faster than total GDP over the past 15 years1. Digital transformation is rewriting the playbook of commerce, creating dynamic shifts in how we trade, engage, and communicate. To continue to support the ever-evolving real economy, financial institutions (FIs) must do more than just keep pace – they need to lead.
Opportunities in threats
One of the most obvious changes is the burgeoning creator economy. Here, individuals develop and monetise their content. As these creators cater to global audiences, they’re forging partnerships with novel payment platforms and methods to ensure their transactions are as limitless as their creativity.
For FIs, this huge emerging addressable market – which is estimated to grow from USD250bn today to USD480bn by 20272 – represents an enormous opportunity. However, traditional banking mechanisms often struggle to keep pace with the unique demands of this segment. Amid this rapid transformation, there’s a palpable risk: FIs that don’t innovate could lose relevance.
To better align with today’s digital-first demands, a growing number of FIs are developing banking-as-a-service (BaaS) models that enable them to provide their offerings in a modular, agile way, while forming deeper relationships by co-creating solutions that truly deliver.
One example of this is Standard Chartered’s nexus, which enables online platforms and ecosystems to develop tailored financial services products with the Bank, thereby providing millions of new, tech-savvy clients with convenient access to financial services.
But it’s not just about individual creators. Entire marketplaces are shifting online, and the B2B space is currently the fastest-growing channel, with sales doubling from USD56bn in 2021 to USD112bn last year3.
This rapid growth translates to a need for innovative marketplace-specific financial services – and it’s clear more work needs to be done on this front. According to a recent Commercetools white paper4 on pivotal B2B commerce trends, although 67 per cent of the B2B buyer journey takes place within digital channels, two-thirds of those buyers are dissatisfied with their online purchasing experience.
When it comes to serving the digital economy effectively, collaboration is the way forward. As an example, by partnering with the global payments platform Tazapay, Standard Chartered is streamlining the cross-border payment conundrum enabling global marketplaces and e-commerce merchants to seamlessly process payments from buyers across over 70 markets, whatever their payment method, all through a single API. The solution also includes buyer protection, leveraging Standard Chartered’s Escrow-as-a-Service (EaaS) offering, with features such as document verification and customised payment release upon transaction completion.
Shared visions between different players can also unlock greater synergies, as in the case of a memorandum of understanding (MoU) signed between Standard Chartered and European venture-builder KI Group. The MoU combines the complementary strength of Standard Chartered’s expertise in innovative banking services and extensive market presence, as well as KI group’s strong track record and network in e-commerce platforms. By tapping into each other’s experience and capabilities in developing B2B marketplace solutions for their clients, the two parties can bring forth an end-to-end solution that goes beyond banking to build a successful online marketplace.
Aligning resources to remove the guesswork
The digital transformation of the global economy ushers in an unprecedented data opportunity for FIs to understand, serve, and engage new client segments. Online marketplaces, for example, produce transactional data that can unveil insights into both consumer preferences and merchant performance. But it’s not only about having the data; it’s about how institutions collaborate with external platforms and internally within teams to analyse and leverage this information. By pooling insights from different sources, FIs can design financial products and services that empower merchants to manage cash flows, expand operations, improve customer experience, or venture into untapped markets.
However, this new digital realm also presents challenges, especially in fraud detection and risk management. The ability of artificial intelligence to mimic human behaviour or generate convincing fake content, for example, means FIs must be on the frontline of developing robust, tech-driven security measures. Addressing these challenges demands collaboration at its finest – combining the expertise of tech specialists, security professionals, and financial experts to fortify defences and innovate solutions.
Developing a differentiated and agile talent pool to design and develop solutions and integral infrastructure supporting a digital economy must therefore be more than a checkbox for the FIs of tomorrow; it’s an imperative. Initiatives such as Standard Chartered’s aXess Academy and disCover Lab are environments for the Bank’s staff to upskill themselves and collaborate on digital developments. But beyond individual prowess, success depends on how FIs collaborate, internally and externally, making shared goals a strategic priority.
A look ahead to a virtual world
For banks to remain relevant in the new economy, they must go where their clients are – and this includes the virtual world.
Virtual reality is no longer the stuff of science fiction; it’s fast becoming an integral part of the business environment of the future. The metaverse – an immersive extended reality space in which interactions take place among individuals, businesses and automated entities – is beginning to take shape and is set to generate up to US$5tn in value by 2030, according to the latest McKinsey research5.
As transactions, collaborations, and even entire office spaces transition to virtual settings, FIs must reconsider their interaction models. The brick-and-mortar branch may give way to immersive virtual financial consultations or service hubs. Moreover, the ease of virtual collaborations could spur rapid innovation, pushing FIs to offer more diverse products and services.
Global banks like Standard Chartered are leading the way in exploring co-creation opportunities in this virtual space. As part of its work to reimagine its relationships with existing and potential clients, the Bank has partnered with decentralised virtual world The Sandbox, a subsidiary of Asia’s largest blockchain investor Animoca Brands.
This shared journey with partners goes beyond an operational switch to an online mode. Instead, it means harnessing joint endeavours to reimagine what financial services can be in a world without borders.
In this new era, the digital revolution offers unparalleled opportunities for collaborative innovation. In partnership with their clients, technology companies and fintech providers, FIs are not just adapting to change – they’re co-creating tomorrow’s banking.
4 commercetools: Pivotal Trends and Predictions in B2B Digital Commerce in 2023