Fortunately, after coming a long way from the development of the Feds Wire Funds Service in 1918, Fintech has finally arrived. It has become a 21st-century fashion with a very high rate of adoption. And now, it is really influencing how we all handle our personal finances more than anyone could have imagined it would a few years ago.
Table of contents
- How Fintech has changed personal finance management
- Types of Fintech services available in the market for consumers
- New Fintech trends and how they affect personal financial consumption
- How people maximize their finances by investing in Fintech
How Fintech has changed personal finance management
Innovation in technology makes the life of human beings easier; some processes are eliminated and others are streamlined.
On the financial side, purchasing a product online, having applications that facilitate savings or carry your budget is something that is being consolidated around the world.
Today, digital channels have increased the number of interactions that people have with financial instruments. Right in the convenience of our homes and offices, on-the-go and wherever, in 2017 alone, about $780 billion worth of transactions took place on mobile devices.
According to the World Economic Forum (WEF), Fintech is an abbreviation of financial technology, in which innovation is used to design financial products and services in favor of financial education, retail banking and investments.
In addition, the WEF considers that this type of technology increases competition among society provides specialized financial services for those who do not receive the services required from traditional banking and in some cases reduces the cost paid by consumers.
What Fintech offers is an advantage in costs and access. Also, you do not have to be associated with a physical location. The traditional banks have lower reach among people in the developing or less-developed countries. In Mexico, for example, there are more than 2,000 municipalities and just a fraction of them have a bank branch. So what Fintech businesses do is cover that imperfection of the market.
The advance of the Fintech has shaken so much the financial system that banks have had to become more digital and innovative. They developed technology that continues to strengthen the relationship with their clients and their position in the market. In any case, the users of financial services have been the winners.
Fintech companies have gained popularity in the recent years because they have been able to solve, with the use of technology, problems that the traditional financial system did not bother to see.
This type of technology offers benefits to families – since being able to request a bank account or perform a financial transactions from the comfort of their home can, directly and indirectly, impact the costs associated.
In addition, Fintech is also spearheading a demand for more transparent personal finance. Adam Dell, the former owner of Clarity Money personal finance app and a member of the Forbes Finance Council represents this fact succinctly:
Consumers’ demands for a simple and transparent approach to their finances will drive the field more than ever before.
Fintech does not just help us spend and eat through our personal savings and earnings. It has also taught people how to maximize their earning potential by investing in new fintech businesses. This, we will talk about further along in this article.
Types of Fintech services available in the market for consumers
Along with artificial intelligence, Fintech growth is one of the biggest global trends. The IDB notes that between $800 million and $1 billion dollars have been invested by Fintech start-ups so as to establish themselves in the world market.
Meanwhile, according to KPMG, these companies in the United States obtained investments for $3.5 million only in the first half of 2017. And now, in this market, there are 11 companies that are worth more than $1 billion in the US, according to Forbes. It’s worth noting that Stripes alone is worth over $20 billion.
Now, we finally have them. The services they offer, which helped revolutionize how consumers handle their funds, vary a lot. Let’s take a quick look:
- Lending: Marketplaces of loans and alternative financing platforms.
- Blockchain/Crypto: Companies that use this technology when offering financial services.
- Regtech: Companies that seek to streamline audit, risk, and regulatory compliance tasks.
- Personal finance: Softwares to keep track of personal bank accounts and other investment or savings products.
- Payments/billings: Companies related to payment processing, credit card developers and subscription billing tools.
- Insurtech: These are companies that sell insurance digitally or offer web analytics and software for insurers.
- Capital market: Trading software, market analysis, and tools for financial institutions.
- Heritage management: Analytical platforms and tools for asset management and investments.
- Money transfers: Platforms to carry out international monetary transfers and follow-up software.
- Real estate: Everything related to mortgage loans, digitization and investment platforms within the real estate sector.
- Digital banks: These are banks that offer their services digitally and but with better customer experience.
New Fintech trends and how they affect personal financial consumption
Financial institutions want to offer their customers the best way to access all their services so they can operate from anywhere and at any time. Some of the new trends are:
1. The consolidation of online banking
Today, more than 40% of clients of financial institutions use online banking as their first option, and only 1 in 10 people still manage their income through face-to-face offices. All this technological development leads us to the consolidation of mobile banking.
Worldwide, it is expected that payments through mobile phones will exceed $1 trillion this year 2019. The economies of the United States and China are strongly committed to this digitizing trend with fairly strong percentages of users. Remember, more than half the population uses their Smartphone to operate with financial products and services.
Mobile banking, therefore, will continue to grow compared to traditional banking as the digital experience, as a user, and as a customer, is enriched and part of a much more informed base. This trend will consolidate the interaction between consumers and businesses, as well as payments with a single click, and new opportunities for cryptocurrencies.
On the other hand, and at the same time, the trends of consumption of financial services such as the purchase and sale of securities, the realization of transfers, and especially fast online loans, among others, focus significantly on online interactions.
2. Impacts of digital currencies
In the same way, digital currencies and digital markets are growing exponentially. Handling Bitcoins or investing in the online stock market are two concepts already known by many, and the trend is increasing. For instance, today, about 99,000 bitcoins are sent each hour.
Although online financial markets were restricted to companies and small groups of well-trained investors, nowadays, anyone with an Internet connection can access these types of products.
In fact, the advance of technology at financial services has resulted in us being able to manage all types of financial products through our mobile phone.
Moreover, there are even applications and algorithms that allow us to invest in the stock market almost automatically. In the near future, our mobile will be responsible for further analyzing market trends by itself to offer us the best alternatives.
3. Quick and mini credit
Special attention is given to instant and mini credits. With this type of credits, clients can now acquire loans without questions or paperwork. Therefore, it is a business that grows considerably and that increasingly has more followers.
The advantages Fintech offers consumers over traditional banking are many. The problems and requirements that the latter put into granting a loan disappear with the online financial institutions, which offer the money quickly, without questions or endorsements. This has become a respite for many families who need money urgently.
In addition, you can apply for quick loans without payroll. Therefore, it includes not only the family but many types of people and categories, such as young people, retirees, unemployed people, etc. This implies that practically every person of legal age can access a quick credit easily and safely.
Online financial institutions, knowing the opportunity that this implies, have been able to design specific products for each type of client. In this way, they not only facilitate the management and granting of loans, but they also build loyalty and gain customers every day.
Types of mini credits offers
First, there are mini credits that can be acquired instantly without paperwork. These are usually granted in 24 hours and do not require proof of income. The amounts that can be requested are usually between $100 and $700. Many companies offer a maximum of $300 even without interest for the first loan operation.
Secondly, we have the mini credits without payrolls, which depending on the amount requested can demand demonstrable income.
Finally, quick installment credits for larger amounts. The amount of this does not usually exceed $5,000, and they allow fractional repayment with interest.
4. The rise of online price comparators
Today, there are dozens of comparators online. They deal in various types of financial services so that the client can have all their options laid out for them so they can choose the one that best suits their needs.
Examples of some of the best online comparators are Shopzilla, PriceGrabber, and Nextag.
Conclusively, it is clear that the digitization of our daily activities is facilitating our access to a better and higher quality of life in all senses, especially in the economic aspect.
How people maximize their finances by investing in Fintech
As earlier mentioned, Fintech doesn’t just assist us in running down our savings. If used well, they can prove to be ideal investment opportunities.
Investments are an important part of our personal finances, but where and how much to invest is not a simple decision.
Fintech companies represent a more profitable alternative than traditional investment instruments with investment options such as crowdfunding and cryptocurrencies.
Thanks to the new platforms and applications offered by fintech companies, anyone can enter the world of investment, even when you have never tried to invest in conventional products. The only thing you should consider, as in any decision that involves your personal finances, is your position on risk.
You should, however, note that products that promise higher yields are usually those with a high risk.
1. Crowdfunding as an investment
Crowdfunding products offer returns of up to 17%, and more stable products such as bank promissory notes offer yields that do not exceed 8%.
Companies directly connect people who need a personal loan with people willing to lend money at a pre-agreed interest rate. You as an investor will earn the interest generated by the money you lend. The terms that are handled within these products are in the range of 24 to 36 months on average. The question to consider is that, although the returns that you could obtain are greater than that offered by the banks (which are in fact negative), the risk is that the people to whom you are lending the money may not pay.
2. Investment in cryptocurrencies
The cryptocurrency market is now a big industry. However, cryptocurrencies are ultimately synonymous with volatility, and many of the investors that entered this market when it was at its peak have suffered large losses.
Meanwhile, this does not seem to have reduced its attractiveness as an investment product. The total market capitalization in the industry reached a whopping $700 billion in 2018, according to an infographic by Carsurance.
Similarly, in the first three months of 2018, $4.8 billion was collected in the cryptocurrency market. The promise that Blockchain represents has made cryptocurrencies a high potential growth area which promises massive returns on investments. 4th to P2P lending, robo-advisers, and crowdfunding, Blockchain had one of the greatest impact (11%) on the financial industry in 2018.
Before committing to any cryptocurrency, make sure you know it well. Find out about past performance, conditions, fees, among other features.
While Fintech has completely changed how we handle our personal finances, it can be your nemesis towards bankruptcy or your pathway to financial buoyancy; it depends on what financial decisions you place as priorities.
Fintech companies can be an excellent option to diversify your investment portfolio as long as you do not make decisions lightly or buy a product just because it is at its highest valuation.
Make sure your expenditure and investment decisions always align with your personal finance management preferences, the amounts you have saved, and your stance against risk.