Whether it’s checking our bank balance with an app or Venmoing a friend the cost of a bagel, fintech impacts our daily lives. By streamlining and automating financial services, fintech can help companies reduce costs and speed up service delivery. By expanding availability of financial services and offering increased convenience and budgeting controls, fintech benefits consumers as well.
With all this new innovation from the fintech industry, though, it can be difficult to determine which trends are worth investing in. In this article, we will outline different types of fintech that both business leaders and consumers should be paying attention to.
Smart Personal Banking
Fintech has likely had one of the greatest impacts on personal banking. From digital-only banks to budgeting apps to peer-to-peer payment services, fintech has revolutionized the way people spend and save.
Companies that make it easier to do all your banking from a single app are experiencing impressive growth. That’s not surprising, as app-enabled debit cards are fast becoming a mainstay in U.S. wallets. Along with convenient payment capabilities, they let you track your daily expenditures and monitor account balances on your electronic device. With features like automatic saving and mobile payment support, they pack a lot of financial punch in a small piece of plastic.
Smartphones are ubiquitous, so it’s rather startling to learn that mobile shopping accounts for only one-third of online spending. How can this be when mobile transactions can be done anywhere? It’s because typing out payment information on a small screen makes for frequent mistakes, and customers want to wait until they get home to buy.
To solve this problem, online retailers are beginning to integrate digital wallet payment options at checkout. Digital wallets have been around for years because they offer an easy, convenient way to spend. More importantly for mobile purchases, they allow customers to skip the step of typing in their credit card number. Instead, shoppers can push a single button to complete a purchase.
When E-Trade burst on the scene in the early 1980s, the online trading platform democratized the business of buying and selling stocks. Decades later, companies are enabling users to trade stocks, forge business connections, and engage in social networking all from the same platform.
The true innovation from these types of companies isn’t that they’re developing a new process, as E-Trade did. It’s that they’re integrating new features, like social networking, with brokerage activities. Those worlds previously didn’t intersect often. Now, the ability to learn from investment experts, compete with friends, and make recommendations might be too fascinating for potential customers to pass up.
Blockchain enables digital information to be recorded and shared but not edited. This protects valuable data, like financial transactions, from being changed or hacked. Blockchain also distributes the information across a network of computers, spreading out any potential risk.
While seemingly the new kid on the block (pun intended), the technology was actually developed more than 30 years ago. Today financial institutions are starting to use this type of fintech to automate transactions, speed payments, and simplify auditing. Consumers stand to benefit from the increased visibility into the supply chains of the products they buy.
People have always borrowed money from others. But only recently has peer-to-peer lending technology extended the practice to new bounds. By matching investors with loan-seeking businesses and consumers, P2P lending allows people to borrow larger amounts of money from a wider pool. No more are borrowers limited by the funds of their rich Uncle Cecil (and his willingness to part with them).
Innovative lending companies are creating platforms that allow for quick and easy loans at relatively low interest rates. If a small business owner needs seed money for a startup venture or new product offering, peer-to-peer lending could be the answer.
Cryptocurrency is a relatively new form of currency that uses digital files as money. It’s decentralized, meaning that it isn’t backed by a bank or federal government. The level of risk is therefore higher than traditional forms of payment like debit cards or PayPal. But there can be many benefits to allowing customers to pay with cryptocurrency.
Companies that began accepting cryptocurrency at checkout have seen increased sales from customers they weren’t reaching before. Also, the decentralized nature of cryptocurrency means that transaction fees can be eliminated, unlike the standard 2%-4% you see with credit cards.
But it’s important to do your cryptocurrency research, as many business owners are unfamiliar with this category of fintech. You’ll want to be sure the opportunity to capture a different sales demographic outweighs any uncertainties you have.
As with banks, insurance companies are beginning to make the move to digital. Consumers can get quotes via mobile app and initiate claims the same way. A cell phone photo texted to an agent can get the ball rolling on an auto claim without a visit by an adjuster.
By embracing digital capabilities, insurance companies are able to offer their services more quickly at a fraction of the price. This means improved underwriting practices, less administrative work, and much more competitive rates for customers. Whether it’s insurance for your vehicle, property, or employees, tech-savvy insurers can keep you feeling secure while saving you time and money.
Automated Financial Document Review
Financial document reviews are typically done manually. Up until recently, only highly trained employees could verify purchase orders, scrutinize lending agreements, review financial statements, and the like. Catching potential red flags took time and specialized expertise. But now, AI-enabled fintech is speeding up these processes by allowing companies to partially automate their document review processes.
New automation platforms can combine all the stages of document review into a single solution. AI and human review are merged to provide an integrated process. This doesn’t cut the employee out entirely, but it does reduce the amount of time they’re spending on administrative tasks.
New technologies are being implemented across every industry and consumer market at breakneck speed. It shouldn’t be any surprise that fintech is at the forefront of this advancement. Whether you’re applying for a loan or shopping around for insurance, fintech is helping businesses and consumers do what they’ve always done more efficiently.