Finance Monthly - May 2023

Building in digital society The UK isn’t the first country to develop its own digital currency. Hundreds of countries have explored the idea of digital currencies issued by central banks. - including some with massive populations, such as China, India and Nigeria - all rolling out centralised digital monies. China’s E-CNY currency already reaches 260 million people and is set to continue expanding this year. There is a lot we can learn from these rollouts. A major challenge facing any digital currency is bridging generational gaps. There is still a ‘digital divide’ in most societies, where significant portions of a population will have limited access to (or understanding of) digital technologies. In many cases these divides grew stronger in the pandemic era. Many businesses, practices and services moved online - and then stayed there. We’re now seeing another wave of socio-economic exclusion in the cost-of-living crisis. Lloyds’ Consumer Digital Index found that by May 2022 an estimated 35% of the population reported that the rising cost of living was impacting their ability to go online. There is a lot of education that needs to be done to make Britcoin work for everyone. For most people, cryptocurrency exists in a different universe to that of sterling. It belongs with NFTs in the Metaverse, as opposed to with the Queen in our wallets. But a digital pound will have the same tangible value as its realworld counterpart. These people face societal and financial exclusion if they are not supported by government policies and intelligently designed services from banks and financial services brands. So how can the treasury and BoE strike the right notes? Banking on tech Banking and financial services brands are getting better at learning from other markets and sectors. Banks have caught up with helping meet customer expectations with the transition and move from bricks and mortar to digital banks over the past decade. Look at UX. Digital banking apps have taken notes from AirBnb, Uber and Tinder as much as they have from their rivals. And it works because it reflects what users want. Understanding the needs and expectations of users is central to creating behaviours which stick. We know that younger generations think digital-first, with research finding that 98% of Millennials and 99% of Gen Zers use digital banking apps – whereas engagement for Gen X and Boomers stands at 86.5% and 69.8%, respectively. Young generations view money as a way to express themselves, represent their beliefs and serve their needs. Financial services need to focus on becoming relationship-driven so that their products and services align with China’s E-CNY currency already reaches 260 million people and is set to continue expanding this year.” Financial Innovation & FinTech 56 Finance Monthly.

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