Fintech is defined as the intersection of tech and finance and is a rapidly growing space as tech companies apply their core competencies to financial services. As a result, fintech has the power to both disrupt the world of finance and revolutionize it, according to experts like Dan Schatt.
Here are some emerging Fintech technologies you should keep your eye on:
Blockchain
What is Blockchain?
Blockchain technology has emerged as the key to solving some of the biggest challenges facing financial institutions and others. It’s the underlying technology behind Bitcoin (which was created to facilitate payments), but it can be used for more than just digital currencies. For example, the ledger-like nature of blockchain makes it ideal for recording transactions, managing contracts, or validating identity.
Why Should You Care?
The potential benefits of blockchain technology are three-fold: cost savings, operational efficiencies, and trust. First, it is an open ledger that holds information on every transaction. Still, the ledger itself is not held by any one person — it’s shared, synchronized, and updated across more than 50,000 computers around the world.
Rather than having banks reconcile their ledgers every night (which takes days for some), they can use blockchain to update records in near real-time. In addition, blockchain could replace central counterparties with smart contracts defining everything from fees to collateral requirements.
Personal Finance Management Tools (“PFM”)
Personal finance management tools can help customers better manage their money, reduce the amount of time they spend managing it, and provide advice on investing or saving. Banks used to be known for telling you what to do with your money; now, they show you how to do it yourself.
The technology powering many of these tools includes advanced data analysis capabilities that allow consumers to take advantage of shopping behavior insights, transaction monitoring software that allows early warnings on bank accounts, sophisticated mobile banking apps, and intelligent cash flow projections. Chatbots & helper bots (virtual assistants) also interact with customers via text messaging, providing financial information 24/7/365 — think Siri for your wallet. Virtual helpers may even give personalized advice on where to invest your money.
Why Should You Care?
Because of this technology, PFM tools can do a better job for consumers than banks can. They will give you advice when you need it most and help you take control of your finances. However, the greatest benefit might be that they empower consumers to know more about their financial situation and take action in real-time. According to Juniper Research, it is expected that over 100 million individuals will use a PFM tool by 2022.
Robo-Advisors
As traditional advisory models continue to face challenges, Robo-advisors are becoming a popular alternative in delivering digital wealth management solutions. Like Personal Finance Management Tools discussed above, Robo advisors rely on advanced data analysis capabilities to provide customers with predictions on adjusting their portfolios. In addition, other technologies like artificial intelligence (AI) are also being combined to help investment advisors make better decisions.
Why Should You Care?
The entire industry is evolving, and consumers can benefit from these changes. For example, advisors will serve more clients by scaling back their efforts, Robo-advisors will improve their predictive models, and investors can get advice when they want it at a lower cost. Robo-advisors may also simplify the investing process for many individuals who otherwise would not seek out financial advice, reducing the burden on traditional advisory services and forcing them to offer better value for money if they want to compete.
