The document provides an introduction to digital finance, discussing major trends driving innovation in the finance industry such as globalization and technology. It outlines the history and types of digital finance services, and describes how digital transformation benefits financial institutions through increased efficiency, productivity, and customer-centric operations. The importance of digital finance in promoting financial inclusion by expanding accessibility and lowering costs is also highlighted.

1. 1H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
INNOV-ACTS, Limited
H2020 FINSEC Project
The FINSEC project is co-funded from the European Union’s Horizon 2020 programme under grant
Agreement No 786727
Introduction to Digital Finance
05/11/2019

2. 2H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Digital Finance - Setting the Scene: Major Trends
Globalization
Technology
Acceleration
Climate Change
§Trends that shape our era
§Driving innovation and growth
in industry, including finance
and banking
§Digital Services in a Connected
World
§Digital Finance should be seen
under the prism of these
evolving trends

3. 3H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Digital Finance Services Overview
Digital Finance Services
• Branchless Banking
• Internet Banking
• Mobile Money & Mobile
Financial Services
Digital Finance
Mobile Financial
Services (e.g.,
Payments,
Mobile Banking)

4. 4H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
History of Digital Finance
1960:
ATMs and
Cards
1990:
Internet and
On-line
Banking
2000+: E-
Commerce,
Broadband
Networks and
Smart Phones
2007+:
Personalization
& the Digital
Customer
2010+:
Financial
Technology
Revolution

5. 5H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
The Digital Financial Institution
Virtual process & End-to-end platform:
• Consumers’ front end
• Bankers and employees’ back end
• Middleware and Control Panels
• Service Delivery Functions i.e. head office, branch office, online service, bank cards, ATM and
point of sales etc.
Targets all financial industry departments and functions e.g.:
• Risk management
• Product development
• Marketing
• Security
• Regulatory Compliance

6. 6H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Digital Finance: Benefits for Institutions (1)
Business Efficiency and Productivity
• Internal functions made more efficient resulting in accelerated productivity.
Cost savings
• Increased automation and fewer manual and error prone tasks
• Digital Branches have way less operational costs than traditional branches
Increased accuracy
• Digital tasks are more accurate
• Business process reengineering for efficiency and regulatory compliance

7. 7H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Digital Finance: Benefits for Institutions (2)
Digital Customer Driven Operations
• CRM for financial institutions enablers targeted marketing and lowers costs for
attracting customers
• Loyalty and customer satisfaction improvements that reduce churn rates
Greater agility
• Faster detection of risks
• Easier and more flexible responses to market pressures
Improved security
• Increased protection against cyber and physical security attaches
• Customer and data protection

8. 8H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Importance of Digital Finance Services
§ Accessibility: Traditional Financial Services are inaccessible to many
people (especially poorer countries)
§ High costs of Bank Branches
§ Complex documentation required (difficult for illiterate individuals)
§ Banking products and experience not designed for low income customers
§ Low income customers are not preferred customers for the banks
§ Technology can lower outreach and operations’ costs
§ Lower Transaction Costs & Lower Agency Costs
§ Low cost of infrastructure translate to high access and scalability (example:
African countries like Kenya)
§ Digital Finance Services are very appealing to millennials and the younger
generation

9. 9H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
High-Level Principles of Financial Inclusion (G20, 2016)
Promote a Digital Approach to Financial Inclusion
Balance Innovation and Risk to Achieve Digital Financial Inclusion
Provide an Enabling and Proportionate Legal and Regulatory Framework for Digital Financial Inclusion
Expand the Digital Financial Services Infrastructure Ecosystem
Establish Responsible Digital Financial Practices to Protect Consumers
Strengthen Digital and Financial Literacy and Awareness
Facilitate Customer Identification for Digital Financial Services
Track Digital Financial Inclusion Progress

10. 10H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Accessibility to Traditional Services & Global Financial
Inclusion
Source: Klapper 2012

11. 11H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Global Findex 2014 Report: The “Unbanked”

12. 12H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Digital Technology Provide Accessibility Opportunities
(to the “Unbanked”)
In 2016 Approx. Two billion people do not have a
bank account – 1 billion of them have however a
mobile phone
The 2 billion “unbanked” and 200 SMEs without
financial services exist mainly in Africa, Latin
America, Asia, and the Middle East.

13. 13H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Customer Expectations about Financial Services
Customer
Expectations
for Financial
Services
Mobile
Personalized Customizable
Accessible

14. 14H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Digital Finance & FinTech Services Appeal to Millennials

15. 15H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Digital Financial Services Impact the entire Industry
Source: CFA Institute 2016

16. 16H2020 FINSEC – DIGITAL FINANCE ACADEMY FOR SECURITY
Commercial Bank Branches vs. Mobile Phones Evolution
Source: World Bank & City Research 2015
Source: IoT Analytics Research 2018