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Technology has evolved exponentially over the past century, with a dramatic change occurring within the past 30 years in particular. While this evolution has arguably transformed every industry in some way, the financial services industry has been completely revolutionized.
It’s no myth that Fintech— financial technology— is reshaping the financial service industry. Here are some of the exciting changes Fintech has caused in recent years.
Encouraging Ownership Over Finances
One of the most significant changes caused by Fintech is the burgeoning ownership and empowerment over personal finances. Consumers no longer have to consult with an investment portfolio specialist or schedule an appointment with the bank for financial planning. Instead, all of their financial information is readily available via mobile apps.
More consumers are taking the time to improve their financial literacy and improve their relationship with money. In some cases, this means taking control of their own financial journey using Robo advisors and investment apps. In other cases, this means accessing remote services, such as a credit repair business, to make smart improvements. This Fintech disruption has effectively cut out the middleman, causing traditional financial services to adapt or become obsolete.
Creating a Competitive Consumer-Driven Market
Another significant shift caused by Fintech is the creation of a consumer-driven market. The introduction of online-only banks and financial apps has changed the narrative for traditional banks. Traditionally, banks were able to dictate prices and use overhead costs as a contributing factor to their business model. Now, however, consumers can call the shots.
This competitive market empowers consumers to drive down banking fees and find affordable alternatives for handling their money. Many traditional banks are being forced to negotiate or acquiesce to meet consumer demands, lest they risk being left for the competition.
Improved Access to Financing
Crowdfunding and peer-to-peer lending are other massive disruptions in the financial services industry. Businesses and individuals are no longer reliant on banks and loan providers to secure financing. Kickstarter campaigns, GoFundMe pages, and Venmo transfers are opening new doors when trying to acquire funds, leaving traditional banks in the dust.
As a result, many financial service providers have had to rethink their approach to attracting borrowers. This shift toward more accessible loan terms also falls under the consumer-driven market umbrella.
Improved Financial Transaction Timelines
Younger millennials and Gen Z have long benefitted from instant money transactions. eTransfers are a staple in modern everyday life. However, moving money used to be a long, arduous process.
Of the many disruptions caused by Fintech, improved financial timelines and turnarounds are perhaps the most beneficial to society. Anyone can apply online for a loan and receive feedback within hours. Money can be transferred from North America to Europe with minimal costs and time requirements.
Better Accessibility for Small Businesses
Improved access to Fintech has helped small businesses compete at a higher level. Rather than investing in costly POS systems and card readers, innovations like the Square plug into a smartphone for quick mobile transactions.
While credit card transaction fees are still a barrier for small businesses, the need for expensive core infrastructure is not.
Shift Toward Cashless Society
Finally, Fintech has helped move the world closer to a cashless society. Services like Apple Pay are eliminating the need to carry around cards and cash for quick, contactless payment options. While the convenience factor was always heavily weighted in this transformation, the global pandemic highlighted the need for this particular disruption.
The movement toward a cashless society goes hand-in-hand with the rise of digital currencies. With each year, cryptocurrencies become more widely accepted as a viable investment option.
Fintech is reshaping the financial services industry for the better. Only time will tell the extent of this disruption and how financial services will look in the future.