blogs & Things

The Effect Fintech Is Having On Our Everyday Lives

We may think of Fintech as a new concept but it’s been part of our lives for decades

 

Fintech, a portmanteau of Financial Technology, is a catch all term for any tech software (or hardware) that’s been created with the goal of augmenting streamlining, digitising, disrupting or generally making better any ‘traditional’ financial service.

Think of the level of fintech that layers our lives already, that didn’t exist just a few years ago.

Monzo completely disrupted the banking app market with more and more users making the switch every month, nights out can easily be split via the transferring of money via Venmo, you can pay for groceries in a shop by scanning a phone with Apple Pay and Uber’s can be ordered with pre-stored debit cards paying for you automatically.

 

Fintech is becoming more and more ubiquitous every day, happening so subtly that many don’t stop to consider how wide ranging it’s even become.

However, as with many emerging technologies, due to the breath-taking scope of what fintech can make possible, it makes it an ambiguous subject to discuss in any kind of depth.

Fintech: A Definition

Fintech refers to any software, hardware, algorithm or application for computers or mobile devices. Fintech platforms can empower the most basic of functions, from moving money around accounts, the paying of bills or applying for a loan right through to technically intricate concepts like the blockchains in cryptocurrency or peer-peer investment platforms.

From there, fintech can branch off into several ‘subcategories’ including, but not limited to:

 

  • Wealthtech – Wealthtech refers to the use of innovative tech such as AI or Big Data to empower investment firms.
  • Investtech – Similar to wealthtech, investtech helps users better invest their day-to-day funds and make the most out of funds that are invested
  • Insuretech – is seen as a commitment within the insurance sector to new, better and innovative developments within their product offerings and back-office processes.

When Did Fintech ‘Start’?

Just because something has become a catchy buzzword recently, doesn’t mean it hasn’t also been around for a long time.

Whilst it might seem like a relatively new phrase as the term Fintech was only added to the dictionary in 2018, as a concept it’s actually been around for decades… think of the introduction of cash machines in the 70’s. At the time, being able to withdraw your own money from a ‘hole-in-a-wall, rather than a bank, was seen as bleeding-edge financial technology, no matter how mundane it seems today.

 

Fintech may once have had a bit of a ‘start-up’ reputation.

If you’d heard the word at all ten, fifteen years ago it’s likely you may have thought of ‘Silicon Valley taking on established banking institutions, today however it’s become an integral part of many digital transformation processes.

How Does Fintech Affect Our Everyday Lives?

Without denigrating anyone, large financial institutions don’t exactly have a reputation for agile methods of working or continuous improvement.

Fintech is changing that though as younger, more techy savvy audiences demand more from the financial sector.

Immediacy, mobility, personalisation… these are just a few of the buzzwords that a modern audience expects in their everyday tech.

Fintech is helping to fulfil those goals by empowering technology to be instantaneous… it wasn’t so long ago that you’d have to go into a bank to apply for a loan or speak to someone on the phone, that decision can be reached instantly on an app now… thanks to fintech.

 

One of the main reasons for the growing popularity of fintech is its ability to bypass previously clunky process, and it often does this by eliminating the need for human interaction and the possibility for human error. We’ve already mentioned you can apply for, be considered and approved/declined for a loan and then have the funds issued to your account… all without the need to interact with a fellow human through the use of some clever RPA and AI. But you can also do the same for a mortgage (technically the same thing, albeit with a much bigger commitment).

It doesn’t end there though.

Want to invest in the stock market? Great, well you don’t need a broker anymore… just automate the process by downloading an app to your phone, invest in what you want, when you want, where you want.

In fact, investment platforms are a great example of how far fintech has come. In previous times, even if it were possible to buy or sell stocks directly, you’d still likely have relied on the advice of a qualified broker. Modern investment apps however all come with a ‘robo-advisor’, an AI backed chatbot capable of analysing the market and offering advice as to where your money is best invested.

Some of these things may seem very simple, but there’s a lot of fintech working very hard in the background to make them all so accessible and streamlined.

How Secure Is Fintech?

One of the surprising things about fintech is the level of trust it engenders in end-users. A recent EY report highlighted the fact that 68% of respondents asked showed a willingness to use financial tools developed by a non-traditional (i.e., non-financial) organisations over those that that were developed by more traditional institutions, with 89% of SME’s happy to share theirs and their client’s data with fintech organisations.

What that shows is that financial apps, processes and tech don’t have to carry a hallmark of authority from Wall Street, The Bank of England or any other large, prestigious financial institution… they just have to perform their function well and make life easier for someone.

 

Whilst all that is true, it should also be pointed out that many fintech companies are almost entirely unregulated. A lot of people at the moment are investing in crypto currencies and the block-chain technology that backs them but were anything to go wrong investors would have very little come back.

 

It may be that there is no ‘one’ answer as to how safe fintech is, taking it very much on a case-by-case basis. In certain instances, fintech can immeasurably improve the security of financial transactions, but newer, dare we say it, flashier, advances are still to be proven. That proof may be difficult to get given the immense proliferation of fintech in recent years.

What Does The Future Hold For Fintech?

One thing’s for sure… fintech isn’t going anywhere anytime soon.

Deloitte did note last year (2020) that the effect the pandemic has had on global economies has left industry analysts and insiders unsure about the immediate future of fintech. Many fintech organisations have suffered setbacks, whilst others have thrived and expanded… with demand for mature fintech solutions at an all time high.

That means though that many, if not most organisations will be increasingly counting on fintech to help them navigate digital transformations in the future.

Longer-term it’s likely we’ll see more and more collaboration, consolidation and even acquisitions between legacy financial institutions and younger fintech’s, with end-users continuing to see an increase as to the penetration of fintech into their everyday lives.

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