The bank of choice for the new digital economy

One of the most exciting things about the New Digital Economy is that we are probably only at the beginning of a wave of innovation and growth that will last for decades to come. Sectors like eMoney and blockchain are expected achieve staggering compound annual growth rates (CAGR) of 39.6% and 27.7% by 2025 respectively. In fact, even if the overall CAGR for the entire New Digital Economy were just 8%, the digital economy will grow from $12.9 trillion in 2017 to $23 trillion in 2025.

So why is the New Digital Economy predicted to grow so fast? Things are moving so fast that it is easy to forget how quickly we got here. The New Digital Economy has been made possible by modern digital technologies such as mobile connectivity, the Internet, cloud computing and blockchain technology, many of which have only become established in the past 10–15 years. This has given rise to new and innovative business models that would have been impossible up until recently. Thus, the New Digital Economy is still effectively in its infancy and there remains the potential for exponential growth in certain sectors before it reaches maturity.

Making a bank

So what do firms in the New Digital Economy need from their bank? On the most basic level, they need to be able to open an account. Despite success stories like those mentioned in previous articles, many innovative, new businesses in the sector are struggling to secure basic banking services as a result of outdated risk modelling procedures. Indeed, UK-based regulatory body the Financial Conduct Authority reported in 2017 that it had observed the denial of basic banking services to numerous firms in the blockchain sector and argued that “deploying this technology should not result in a wholesale denial of access to traditional banking services”.

One of the major issues here is a lack of transparency, meaning that firms do not know why their application for a bank account has been rejected. To make matters worse, fledgling businesses in the New Digital Economy often need to wait weeks or even months before they get a final decision, and time is a valuable commodity in a sector which moves so fast.

Removing barriers

Beyond these fundamental concerns, however, firms in the New Digital Economy need flexible bank accounts which they can quickly and efficiently tailor to their needs. This is where banking APIs come in.

Do you remember what mobile phones were like prior to advent of App Stores? Of course you could still do the basics like sending text messages, making calls and even playing some simple games. But what really triggered the wave of innovation and app economy of today was opening up smartphone platforms to third-party app developers. Banking APIs promise to do for FinTech firms what the app store did for app developers.

Indeed, 65% of respondents to a recent EFMA study rated “open Banking APIs” as the technology which will have the greatest impact over the next 12 months. APIs are a way for banks to open parts of their software so that it can be more easily integrated by their clients into apps, websites, or in-house software. For example, some common uses of APIs are to automatically link bank account data with accounting software, to automate payments to suppliers, or to automatically deduct money from a client’s bank account for services rendered. But this is just the tip of the iceberg of potential use cases.

Banking without borders

The digital economy knows no boundaries and thus clients need to be able to transfer funds across international borders. This can be complicated by differences in regulation relating to fraud, anti-money laundering and investment protection in various territories.

International bank transfers take place based on a consensus and double-entry system, involving multiple parties including the domestic and central banks in both territories. In some cases, firms may find that they are unable to move funds to an account in another country due to procedural hurdles inherent in this process. The easiest way to avoid such problems is to use the same bank in both jurisdictions.

Introducing INITIUM

Sometimes the best way to build for the future is to make a fresh start. INITIUM Group has been developed from the ground up to give firms in the New Digital Economy the banking services they need. This includes a simple, efficient, quick and transparent account opening process. In addition, powerful and flexible APIs put our clients in the driving seat, allowing them to automate repetitive tasks and tailor their banking services to customer needs. Finally, INITIUM’s multi-jurisdictional reach will allow our customers to effortlessly transfer funds across regulatory boundaries in a fully legally compliant manner. This is why INITIUM is the bank of choice for the New Digital Economy.