The emergence of FinTechs hasn’t just changed the way of modern banking, though. The industry is both disrupting and enhancing the following:
Trading securities is a staple of any prominent capitalist economy and has been a major industry for decades. However, the way that traders operate—even who is now considered a trader—has completely transformed since the dawn of Wall Street in the 18th century. Gone are traders swapping slips of paper and here to stay are complex algorithms and automated technology. Enter retail trading.
Retail trading has really boomed over the past few years with platforms like Robinhood, WeBull, and Think or Swim. These platforms, especially Robinhood, have increased the ease in trading and adapted principles of gamification to keep their market share. Business Insider reports how retail traders make up nearly 25% of the stock market activity following COVID.
In addition to creating a new type of trader, these platforms have put their resources behind breaking barriers of entry for casual traders. Most notably, many of these innovative FinTech platforms have reduced or eliminated trading fees due to a more cost-effective and streamlined operational model. FinTech is empowering every individual to trade and follow financial markets regardless of income or how much liquidity they have. This type of accessibility is only possible with the rise of FinTech.
The insurance industry is seen by many as the cornerstone of American enterprise. Some of our favorite television advertisements and slogans are born out of the insurance industry. But it’s not just corporate mascots that are making an impact in insurance. It’s the technology.
An innovative segment colloquially known as InsurTech, is on the rise. Thanks to this innovation boom, people no longer have to wait days to get insurance quotes. Much like decisions on loans, credit cards, and mortgages, consumers can get quotes on insurance within seconds.
This shift changes the way consumers are approaching the idea of purchasing insurance as consumers don’t necessarily associate big insurance companies with trust and reliability like they used to. The biggest change to how consumers approach purchasing insurance is the shift to a pay-per-use model versus the historical model of collecting premiums regardless of the consumer’s use. This innovation is only possible because of the data that is now available due to the emerging technologies in FinTech.
One of the most common uses for FinTech is personal finance apps for consumers. With leading apps like Mint, Personal Capital, Tiller, and YNAB, FinTechs are focusing on key consumer trends in today’s generation: financial literacy and debt management.
Consumers no longer have to spend hours making spreadsheets or keeping monthly budgets. Apps like Mint let consumers connect to their bank accounts and track their spending habits while allowing them to set limits on each spending category. They also notify consumers when they are spending too much money in a specific category. These and other similar tools allow consumers to better understand their personal finances, spending habits, and manage debt.
Only 10 years ago, people would need to go into a physical bank branch if they wanted to deposit a check. Now, with modern technology not only can someone deposit checks from their smartphone, but they can manage their entire banking experience on-the-fly. Consumers don’t need to spend hours or even days trying to open a loan or get a credit card, it can now be done instantly thanks to the latest cloud banking technology.
These innovations led to a new type of bank, often called challenger banks. Challenger banks are branchless digital banks that spend most of their resources on creating smooth interfaces and optimized user experiences. Many traditional banks are facing these challenger banks head-on—and investing heavily in digital innovation and striving to provide omnichannel financial products and services—despite challenger banks like N26, Revolut, and Monzo encroaching on global market share.
Traditional banks must now decide whether to build this technology internally, often at significant costs and on long timelines, or partner with an outside technology provider. Many are choosing the latter option to defend their market share and are leaning on other FinTech companies to deliver this digitization at a fraction of the cost and time of building this technology in house.
Cryptocurrency and blockchain
Cryptocurrency and blockchain are on a meteoric rise. Cryptocurrency is a type of digital currency built on blockchain technology that uses digital files as a form of payment. Cryptocurrency exchanges such as Coinbase and Gemini are serving as a platform for consumers to buy cryptocurrency like bitcoin, ripple, ethereum and litecoin. Blockchain services are working to reduce fraud and establish governance within the broader cryptocurrency arena. Safe to say that FinTech is being pushed to the edge by cryptocurrency and blockchain.
It’s more than likely someone has asked you to “Venmo me” to pay a debt owed. Even five years ago, this type of jargon would be lost on many. However, mobile payment apps like Venmo and Zelle have become common household words nowadays, filling a need in the market left unfilled for far too long. Now that nearly everyone has a mobile device at their fingertips, payments innovation has taken off.
Consumers can instantly send people money now through Venmo, Zelle, CashApp, all for free. This type of technology now opens the door to something called embedded finance where big companies like Apple, Amazon, Alibaba can also join the game. Sending, receiving and transacting in day to day life is just becoming easier and more convenient everyday.