Financial technology, or fintech, companies are continuing their market creep this year and challenging the status quo when it comes to banking, lending and saving. Businesses and consumers alike are growing accustomed to easier, streamlined ways of transacting online and want to see more products and services that support this. While in some ways the fintech industry is still a wild west of the financial industry (when compared to traditional financial institutions), there is a lot to love about the way these savvy companies are improving the industry.
If you own a business and want to stay ahead of the financial curve, it’s important to understand fintech and what the industry could mean for your bottom line this year, and beyond.
Robo Advisors are Coming
It’s true that a lot of financial advice is nuanced and there is really no way to dish out the same guidance in a mass way. This is why the personal touch of an in-person advisor has always been a staple of investment and banking interactions. What if there was a way to duplicate that person-to-person exchange, but without the human element? Fintech companies are working towards this end goal through the use of robo advisors like Betterment and Wealthfront. These algorithm based investment technologies determine the best portfolio makeup and tax loss harvesting techniques. If a “set it and forget it” approach doesn’t’ make you warm and tingly inside, there are robo advisors with a human component like Personal Capital. The popularity of robo advisors will come down to personal preference – will more people want the convenience and customization of a robo advisor, or will more people prefer to hear their best options from the mouth of a human?
Online Lending is Exploding
From 2010 to 2014, marketplace lending grew by 700 percent – and Morgan Stanley estimates that $47 billion in small business online lending will transact in 2020. It used to be a lot harder for business owners to obtain loans, especially ones without a track record or less-than-perfect credit. When business owners went the traditional bank route, there was less of a chance of getting approval and there was also less money to go around. Online lending has changed all of that by better connecting businesses with investors, large and small, looking for a return on investment. Online lending platforms connect businesses with a multitude of potential investors, often with just a single application or portfolio. Businesses are the only one who benefit from online lending; student lending refinancing, car financing and even personal loans can be shopped through online platforms too. It’s true that there have been some hiccups regarding business security in relation to fintech paths – but as the financial technology tools are improving, so is the technology to secure it all.
Fintech is Going Global
It isn’t just Americans who are buying into fintech as the future. The Economist reports that 65 percent of mobile users in China rely on their phones as wallets (that comes out to 425 million people) and that in 2016, mobile payments in the country hit $5.5 trillion USD. This means that the companies exist to support these types of transactions, and that consumers are thirsty for more from them. We often think of countries like China and Japan when the topic of technology arises, but even countries like Iran and Somalia are building a robust fintech scene – and in the case of Iran, a regulatory fintech organization that is a model for other countries. It’s important to note that fintech is not an issue relegated to one country or area of the world; businesses must understand the implications of fintech on a worldwide platform.
As fintech companies continue to push the banking and investment envelope, expect to see more options for businesses and consumers. Take advantage of the competition to find the best fit for your financial needs among the many – and the fintech services that will best set you up for success.
This post is part of our contributor series. It is written and published independently of TNW.
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