Finance

Already one of Latin America’s economic powerhouses, Brazil is now emerging as a first mover in the digital banking space. Banco Central do Brasil plans to roll out a digital version of its traditional currency, the real—a project that could reimagine the country’s payments industry while also putting a dent in the financing of illicit operations. Fintech innovators from around the world participated in the bank’s Life Challenge, aimed at building minimum viable products to rapidly explore potential applications for the Digital Real. In March, nine companies were chosen to develop pilots, which are scheduled to go live in 2023.

“I wish there was a way to invest in social media influencers! [I don’t know] anything about the stock market and I find it boring,” tweeted Jimmy Donaldson (aka MrBeast), a YouTube star with 100 million subscribers. That stray Twitter post in December 2020 reportedly kindled an idea for Sima Gandhi (a veteran of American Express and fintech unicorn Plaid) and Ezra Cooperstein (president of digital creator management company Night): The duo co-founded Creative Juice in 2021 and quickly rolled out a suite of banking and invoicing tools tailored to content creators. But the biggest buzz came in April 2022, when the team unveiled Juice Funds. Creators can now apply for capital infusions (from US$15,000 to more than US$500,000) in exchange for a share of their revenue over a set period of time. The project adds more “juice” to the global creator economy, projected to top US$104 billion this year. And with more access to capital—through Juice Funds and similar financing projects—social media influencers can have a whole lot more influence.

It was one of the largest and most significant trials of integrating digital currency into an established financial market: Euroclear and the Banque de France completed a 10-month project in October 2021 to execute bond transactions using blockchain and the central bank’s own digital currency. Powered by a broad team of finance, tech and regulatory heavy-hitters—including IBM, Crédit Agricole CIB, HSBC, BNP Paribas and Societe Generale—the project included nearly 500 executed instructions, with the various groups trading government bonds as securities tokens, which were then settled with digital currency supplied by the central bank. “This project went well beyond previous blockchain initiatives,” Soren Mortensen, global director of financial markets at IBM, told The Financial Times. “We are rapidly moving towards fundamental change in the post-trade market infrastructure.”

When the Japanese government set an ambitious target to double the portion of consumer payments made digitally to 40 percent by 2025, it sparked a flurry of innovation in the country. One bleeding-edge example that could upend contactless payments: 7-Eleven launched a pilot in Tokyo to test Digi POS, holographic payment terminals developed by Toshiba. Rather than cede valuable counter space to a bulky payments screen, the point-of-sale system is embedded into the counter and projects an image of a touchscreen, which shoppers can tap without needing to touch the kiosk directly. The developers also hope the touchless screen will reduce the transmission of viruses and free up staff to focus on more valuable tasks. Launched in January, the pilot could help determine broader adoption across the country’s 30,000 7-Eleven stores—and eventually ripple far beyond Japan and even the convenience store category.

Banking shouldn’t just be for the big guys, but credit constraints mean that’s often the reality for India’s entrepreneurs—particularly the country’s 8 million women running micro, small and medium businesses. So, in April, India’s ICICI Bank launched a digital ecosystem that makes banking more accessible by allowing users to open accounts digitally and access financial services in one streamlined platform. And rather than limit the new offering to its own clients, ICICI Bank put out the welcome mat for guest accounts too—leveling the playing field for small businesses across India.

What will the metaverse mean for banking clients? How can AI and machine learning fuel financial operations in more powerful and unexpected ways? Looking to answer such questions, Microsoft and Spain’s CaixaBank announced in June the joint creation of an AI Innovation Lab in Barcelona—essentially a safe sandbox for a collaborative team of data scientists, AI experts and software developers to test prototypes and use cases in the metaverse and other immersive virtual environments. Among the earliest projects already identified: creating a “cyber assistant” to help with back-office finance tasks. Another is a training program (dubbed “AI Business School for Financial Services”) aimed at helping banking professionals hone their strategic AI chops and fine-tune their technical skills. The larger goal? “Transform the experience of financial services customers,” says Microsoft Spain president Alberto Granados.

U.S. retirement account investments tally US$12.1 trillion, making up 47 percent of all mutual fund assets. Yet few people have the time or expertise to dig into the environmental, social and corporate governance (ESG) factors of the individual stocks in the mutual funds available in their employer-sponsored retirement plans. In July 2021, the nonprofit corporate accountability organization As You Sow unveiled a way to make that scrutiny as simple as a few clicks: The tool analyzes thousands of mutual funds, exchanged-traded funds and 401(k)s against seven ESG criteria, then turns that deep dive into a simple scorecard for publicly traded companies. “It’s time to create coherent corporate cultures that look at retirement plans the same way they look at operations,” said CEO Andrew Behar. “The retirement plan scorecard is giving employees the tools to make this a reality.”

Contactless payments surged during the pandemic, but digital wallets may not be the default for much longer. In May, Mastercard launched a pilot of its Biometric Checkout Program, which allows shoppers to pay just by displaying their face or fingers. A collaboration with tech firm Payface and Brazilian food retailer St Marche, the project brings facial and fingerprint recognition to point-of-sale at five grocery stores in São Paulo. Users link their biometrics to a payment card via a mobile app, then can smile at a checkout camera or wave their hand over a scanner to pay. “The way we pay needs to keep pace with the way we live, work and do business,” Mastercard President of Cyber and Intelligence Ajay Bhalla says. The project makes Mastercard an early mover in biometric payments, but it’s just the start: The company has unveiled plans for similar pilots in the Middle East and Asia.

Buying a home, starting a business, getting a loan—all of these endeavors require credit. And that’s a huge barrier for the estimated 45 million U.S. adults with no credit score, a disproportionate number of whom are Black and Latino. Solving that systemic issue can’t happen in a silo, so last year the U.S. Office of the Comptroller of the Currency launched Project REACh, bringing together major banks, tech firms, credit-reporting agencies and nonprofits to work on projects to remove barriers to financial inclusion. In May, the agency announced a pilot of its Alternative Credit Scoring Utility Workstream to synthesize a credit score from alternative data, such as rent payments and utility bills. During the government-backed pilot launched this year, 10 banks—including JPMorgan Chase, Bank of America and Citibank—shared deposit account data and used alternative data to widen the aperture on who is considered creditworthy.

Expense reports have always been a drag (for employee and employer alike), but pandemic shifts—in reporting requirements, work-from-home expenses and stakeholders involved—have made managing corporate spend even more onerous. To rethink the receipt-clogged space, Mexican fintech Clara developed an AI-powered platform and smart corporate card, which allows managers to set detailed spend limits in line with company policies while finance teams get accurate, up-to-date insights on cash flow. More than 1,000 companies flocked to the nascent finance tool. And just three months after achieving unicorn status in December 2021, Clara partnered with Mastercard to help power the company’s expansions across Latin America.