Are you stressed about managing your money? Most of us are at one time or another. Whether you are trying to track your spending or invest spare change, fintech is here to ease your money worries. That's the promise of the entrepreneurs and engineers working in one of Silicon Valley's fastest growing industries.
Fintech (a combination of financial and technology) startups are introducing simple ways to invest and track your finances while established institutions are creating and using new technologies to offer personalized recommendations to customers. Using a smartphone to make a purchase or comparing loan rates online can make your life simpler and save you money, and that's just scratching the surface of what fintech enables.
Technological innovation in finance is in substantial growth with no signs of slowing down. An Accenture report found fintech investment in the first quarter of 2016 grew by 67 percent compared to the first quarter of 2015. That's a continuation of the year-over-year increases that've taken place over at least six years.
The investments are helping people at all levels of the economic spectrum. According to the Bill and Melinda Gates Foundation, even those living in extreme poverty are poised to benefit from changes in mobile banking. Over the next 15 years, it expects two billion people to open their first bank account and start saving and spending money with a phone.
Six Ways Fintech Can Help
There are many ways to manage your personal finances, and here are just a few examples of how fintech services could help you in everyday life.
• Banking online. Online- and mobile-only banking can offer you limited fees, low or no minimum account balances and a relatively high interest rate on your savings. You'll often be able to access your money for free using an associated network of ATMs, or get reimbursed for ATM fees, and deposit money by taking a picture of a check or making an online transfer.
• Budgeting easily and efficiently. Instead of relying on a paper notebook or spreadsheet, you can use digital budgeting apps. There are apps that sync with your bank, credit and other financial accounts to let you track your spending and savings in real time. You can even track spending in different categories, receive notifications when you exceed your budget and analyze the data to see what categories eat up most of your paycheck.
• Saving money automatically. Online and mobile apps can make it easy to grow your savings. Some services use algorithms to calculate how much money you can afford to save at a given time, and then automatically transfer the money to your savings account.
• Investing your money with minimal effort. Technology has made tracking and managing your investments easier. Robo advisors are computerized investment management services that offer low fees, an easy setup and a customized investment strategy based on your information and goals. You can let a computer create and manage your investment portfolio with just a few clicks and make adjustments based on your desired risk and when you'll want to withdraw their funds. Additionally, some companies can round up every purchase you make with your debit card and automatically invest the money with a robo advisor.
• Getting paid back quickly. Say goodbye to the 10-minute post-meal negotiation as you and your friends try to split the check. Mobile apps linked to checking accounts let you send and receive money instantaneously. One person can pay the bill and the others can send him or her money from their phones.
• Comparing loan offers. If you're looking for a loan, there are services that allow you to enter your information once and receive loan offers from competing lenders. The easy-to-use shopping tools can make it easy to find out which lender will give you the lowest interest rate, saving you money over the lifetime of the loan. Choose the loan with the best terms and you may be able to complete the entire loan process online.
These are six examples of how you can use new financial technologies, but you might also be benefiting without even realizing it. For example, a startup could power your bank's online chat service or send you notifications when there's suspicious activity on one of your accounts.
Keeping Your Funds and Financial Information Secure
Even if a new app or service seems reputable, it's important to take steps to safeguard your finances and personal information.
• Always research an app or service before you use it. Search the name of the app or company and look for reviews. Positive reviews by major media outlets are usually a good sign that the service is considered to be reputable and reliable.
• Improve your password security. Password protection is a deceptively simple, but very important aspect of online security. Don't use the same password for two accounts, financial or other. Wherever possible, use two-factor authentication, meaning security is double-layered and someone can't log in with your password alone. For example, see Google's password tips for more advice on keeping your accounts safe.
• Use biometric authentication. Some banks offer various forms of biometric authentication that you can use to log into your account from your phone. Rather than type in a password, you can use the phone's camera or microphone to verify your account with your fingerprint, eye, face or voice.
• Enable location-based alerts. Geolocation tracking can easily add an extra layer of security to your account. With your permission, banks can use GPS data from your smartphone to verify that you're with your card when it's used for a purchase. As an added bonus, your bank might be able to easily notify you where the nearest fee-free ATM is and send you discounts or offers from nearby merchants.
• Don't put all your money in one place. Keeping your assets in several accounts can help limit your risk. Even if one account is attacked, you'll have access to your other money while the financial institution looks into the matter and makes you whole. If you think your account has been compromised, consider the Consumer Financial Protection Bureau (CFPB)'s advice for reporting suspicious charges and avoiding future losses.
Bottom Line: Fintech is changing the way people interact with money, and there's something for everyone. Though there are important security risks to consider, the innovative and intuitive services can help you save and manage your money.
Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.