FinTech: The Changing Face of Digital Financial Management
Personal finance as we know it is changing for the better – here’s what you need to know about the bold future of fintech.
Going to a bank to wait in line and deposit cash is so last century. In fact, even banks made of bricks and mortar are starting to look a bit old-school.
So what is Fintech?
That’s because financial technology, better known as the fintech industry, is springing up around the world to compete with traditional methods of delivering financial services. Your smartphone is a piece of fintech, as is crowd-funding, mobile banking and bitcoin.
What all forms of fintech have in common is making the process of applying for credit, more accessible to the general public, and it’s almost always more affordable and quicker. It usually also relies on the internet and is tailored towards your individual needs, rather than being a mass offer.
Fintech is often rolled out by startups, but sometimes existing players offer something new – or sometimes it’s a partnership between the two. The thing to remember is that it’s a win for you, the customer, because it introduces a completely new level of competition. Everyone is trying to muscle in on the traditional turf of financial institutions. So it pays to be aware of what the new possibilities are for your finance needs.
Australia has around 400 fintech companies and is considered to have one of the most dynamic fintech industries. That is partly because financial services is one of our largest industries. It’ll contribute an increasing share of our Growth Domestic Product, which at the moment is around 9% according to KPMG.
How does fintech change our shopping habits?
In a nutshell, it makes buying and selling happen faster. New types of technology enable same day international transactions, which used to take weeks. With so many of us now shopping online from overseas suppliers, it means less waiting for things to arrive. Payment apps can also be integrated with savings accounts to allow things like mobile-to-mobile payments, online payments and investments and transfers.
It also makes it more convenient to shop from small businesses, because fintech firms are often better at serving their needs (and their need is to serve you).
If you own a small business or plan on owning one, rejoice, because it’s becoming easier and faster to obtain a loan. Cash flow is also helped by the fact that many fintech products allow payments to be made in seconds rather than weeks. So that frees up businesses to invest in other cool products to offer you – it’s a win-win!
Is there a downside?
In theory, there isn’t a downside to the new technology being available, but many worry about data security in this brave new frontier. Unfortunately, hackers are getting more sophisticated and the threat of hacking is ever present. Governments are trying to keep up with the pace of change by creating appropriate laws to reduce the risks of online criminal behaviour. In the meantime, educate yourself about how to protect sensitive data, both personal and financial.
At the same time, new fintech solutions are emerging to combat the threat. One example is fingerprint identifiers and facial recognition technology. Both are becoming increasingly common and are hands down a better alternative to remembering 20 complicated passwords. Some fintechs are working on voice recognition services too.
What is blockchain and why should I care?
Blockchain is one of the most significant pieces of fintech technology. It’s also one of those words that you hear spoken about a lot, without actually knowing what it is. Let’s demystify it: it’s a futuristic ledger. The ledger is made of a growing list of records (or “blocks”) that are linked together. The data that records the details of a particular transaction within one of these blocks, can’t be modified unless the majority of people in the network agree, and all subsequent blocks are changed.
Blockchain has a cool origin story too. It was invented by a person called Satoshi Nakamoto in 2008 as the public transaction ledger of the cryptocurrency bitcoin. However, no one knows who that person is, and whether it was in fact a group of people working together. In 2010 he, or she, or they, ended their association with bitcoin, handing it over to software developer Gavin Andresen. There have been rumours about who Satoshi’s real identity is, but it remains a mystery. Like a financial Banksy.
Fintech is creating spinoff industries
Fintech is disrupting other industries like retail and insurance. In fact, the term ‘insurtech’ has popped up to describe a new industry of insurance that uses these new forms of technology. This includes car insurance, home insurance and even pet insurance. For example, if you’re unlucky enough to be in a car accident, you could take photos of the damage and send it to your insurance provider. They could assess the damage and get you a response on your claim in a matter of hours rather than days. That means less stress for you.
Fintech is the future – and the future is happening now!