Not too long ago our only access to financial services was our high street bank, which regularly involved costly time-consuming processes, and our only means of paying for goods and services were using cash or a credit card. However, since the emergence of new innovative financial solutions provided by the fintech sector we now handle our money in a more efficient, cheaper and more convenient way.
We bank digitally
Waiting in line at your local high street bank to pay your bills has become a thing of the past for many banking customers today. With the rise of online and mobile banking, many customers, especially millennials, prefer to conduct their banking via their bank's online banking platform or smartphone app.
Some consumers have taken it a step further and have become customers of digital-only banks, such as US-based Simple or Germany-based Number26, and no longer bank with traditional high street banks.
We pay using our mobile phones
With the emergence of mobile payment services such as Apple Pay, Android Pay and Samsung Pay and consumers can now pay for goods and services in stores using their smartphones. The way all of the above mobile payment services is work is by scanning your debit and credit cards using the apps and storing their details in your phone. Then, once you make an in-store purchase you open the app and simply tap or hold your phone over the NFC-enabled (contactless) credit card terminal at the point of sale.
Mobile payment services are a natural progression of the digitalization of services and the gradual move towards a cashless society. In the United States, Apple Pay and Android Pay have witnessed fast adoption as consumers are starting to prefer to use their smartphone to make financial transactions.
We borrow from our peers
Until recently, if we needed a loan for personal or business purposes we had the choice between going to the bank or reaching out to a credit union. Both of these options require the borrower to possess a good credit score so that he or she can receive a loan at a reasonable interest rate. In many cases, however, no loan will be approved as banks have reduced lending to small businesses and individuals since the 2008 financial crisis.
However, out of the fintech sector, a new form of lending has been created called peer-to-peer lending. Peer-to-peer refers to a way through which individuals and small businesses can borrow money from a large number of individuals without the use of a traditional financial intermediary. This enables debt financing for those who are finding it hard to secure a loan from a bank or credit union. On the other hand, those who lend money through peer-to-peer platforms can generate strong fixed interest investment returns.
To borrow via a peer-to-peer lending platform, the borrower has to sign up to the platform, state the desired amount he or she requires and undergo a due diligence process so that the peer-to-peer lender can assess his or her ability to repay the loan at full. Once, the borrower's application has been approved and the borrower agrees to the terms of the loan it will go online and individuals can lend to the borrower via the peer-to-peer lending platform.
We make international money transfers online
If we wanted to make international money transfers in the past we had the choice between making a wire transfer using our high street bank or use remittance corporations, such as Western Union or MoneyGram. Both of these options involve high fees, which reduce the amount of money we want to send.
This is an issue that has been addressed and resolved by several fintech companies, which provide substantially cheaper international money transfer services than its peers from the traditional financial industry. Companies such as WorldRemit, Azimo and TransferWise offer low-cost international money transfers for both individuals and SMEs through their online and app-based platforms.
The way we handle our money has changed in the last decade as fintech has provided consumers with new ways to conduct financial transactions. It will be interesting to see how the future of money management will look like.