Fintech, short for financial technology, combines the world of financial services with that of technology. The end result is an enhanced user experience and additional financial products that are usually automated. Meaning, they don’t require the assistance of a live person.
In this article, Freedom Financial Network will go over several areas in Fintech that are changing our personal financial lives for the better.
Changes In Our Everyday Lives
One place you have probably already noticed a big change is in banks. Where did all the tellers go?
While banks still have tellers, there numbers have been cut drastically. Nationally, tellers have dropped 17% from 2005 to 2015. When Wells Fargo opened their first high-tech bank branch in 2013, it had no tellers. Instead, the bank was outfitted with large touch-screen ATMs. Although there were a few employees walking around with tablets providing assistance, there were no formal tellers.
In the Washington DC area where Wells Fargo opened its high-tech branch, tellers dropped by nearly half from 2005 to 2015.
Have you noticed any negative impact in the absence of tellers? Probably not.
Freedom Financial Network notes that nearly everything you use to do in the branch, you can now do online or in an app. This means faster banking solutions right from your computer or phone. No more driving to the bank to deposit a check. Now just snap a photo and do it through your phone.
Fintechs have affected our lives in many other ways. Going back to banks, when is the last time you actually walked into one?
It isn’t just banks that have been affected. How much cash are you carrying around and if you are, how often is it used compared to your credit/debit card or mobile app for making purchases?
All facets of our personal financial lives are now different compared to about 10 years ago. Now we regularly do all of the following online:
– new loan
– transferring funds
– opening new credit card account
– buying insurance
– student loan refinancing
– paying a friend through a peer-to-peer app
10 years ago, could you have imaged this is what 2017 every day personal financial would be like?
Increasing Our Personal Financial Literacy
Increasing your financial literacy can literally save you money. Freedom Financial Network says some Fintechs are already creating solutions that teach children about financial literacy.
One such company is Greenlight. It has created a debit card that children can use. The card is controlled by the parents, through a mobile app. Parents have control over where a child uses the card and how much they can spend. This provides children with real world use of money on a modern medium. Parents are even able to load the card with the child’s weekly allowance.
Each child gets their own card. It has their name and a PIN. The service is free for the first 30 days, giving parents a no cost option to try out the technology. After the first 30 days, the fee is $4.99/mo.
Unlike cash, which can’t be recovered if it’s lost, the card can be frozen from the mobile app if it’s misplaced.
Parents are able to track spending and approve purchases from a new store, and their child can create a record of spending.Together, parents and children can discuss spending behavior and have more insightful conversions about saving money and budgeting.
Digital Personal and Small Business Lending
One area that Freedom Financial Network says has grown the fastest is lending. Personal online lending is mainly responsible for kicking off the Fintech revolution.
No longer is getting a loan a multi-day process requiring several trips to a bank. Now you can simply fill out an online application in a few minutes and get an immediate decision.
Fintech lenders are able to process loans so quickly because they aggregate information from various online resources. Their software crunches the numbers in seconds and produces a faster result.
Sometimes these results are merely a pre-approval, which means that more information is required to make a final decision. Even then, the process usually continues online and can be completed as fast as the customer is able to gather the required information.
With the explosion of Fintechs offering personal lending solutions, business lending wasn’t too far behind. There’s now a wide range of solutions available for business owners.
Fintech business financing ranges from invoice factoring, which is an advance against a company’s outstanding invoices, to more traditional loans. In some cases, these loans don’t require collateral. So if you are a new business with no collateral to pledge, there are still financing options available. Although, the rates will usually be quite high.
One area that Fintechs haven’t fully brought into the online world are mortgages, although the majority of a typical mortgage application process is now online.
Can A Robo Adviser Do It All?
Robo advisors are the name given to automated software that helps to manage your money where no human assistant is involved.
The way robo advisors work is to first have you answer a number of questions. Then, the software determines the best strategy for your money based on the answers you provided. Robo advisers usually cost less than using a financial planner, but they remove the emotional human element.
Should you let software plan out your financial future? Basically, that depends on how much you trust the software as well as how complex your finances are.
On the other hand, Freedom Financial Network points out, working with a human provides you the opportunity to regular, meaningful financial conversations. Robo advisers can’t do that. Conversations with a financial advisor enables them to dig deeper into your situation and pull out valuable financial insights. It also allows you, as the customer, to develop a better understanding of why a specific plan was chosen and the various factors that can affect your financial future.
Freedom Financial Network offers this level of engagement with borrowers who request loans from FreedomPlus, a personal lending company in the Freedom Financial Network. FreedomPlus specializes in giving one-on-one attention to each borrower, to create the right solution for their lending goals, whatever they may be. Contact them at freedomplus.com for a free consultation.