It’s no secret that the financial industry is old and slow. Dominated by global multinationals – the HSBCs, Goldman Sachs and PricewaterhouseCoopers – there is very little incentive to innovate or make vast improvements to service, because customers do not have many alternatives to choose from. Or do they? This was the case until very recently, but in the mid-2010s something began to shift. And it has the potential to be seismic in proportion. Enter fintech and its effects on the way both businesses and individuals manage their money.
Banks are essentially the shop window of the financial industry. Most of us interact with them on a regular basis, much more often than the back of the shop that includes insurance, pensions and other products. 69% of the global population has a bank account of some kind, but it seems that people aren’t happy with the service they’re getting. In 2019, more than a million people switched bank accounts in the UK alone. Many established banks lost thousands of customers, but a few new players scooped up these unsatisfied customers and showed them that there could be an alternative. According to reports, Monzo Bank gained over 20,000 new customers and Starling Bank gained nearly 11,000. The link? They’re both app-based banks, part of a trend that is promising to revolutionise the banking industry. Their fees and processes are explained clearly and put out in the open, and everything can be done from their apps, so customers need never queue in a bank store again.
Mortgages are another incredibly slow process that many potential buyers can get overwhelmed by. There’s a lot of choice, but every lender says they’re the best, and impartial advice can be expensive. The internet comes to the rescue, though. Independent online brokers like Trussle are offering mortgage advice online at no cost. This is yet another online-only company that makes the process simple and easy for consumers looking for finance-related advice and services. Visitors to the platform can use online calculators to work out how much they could borrow and their repayments, before chatting with an independent expert to work out what is best for them. Many millennials are starting to buy property, and this new online-based way of getting advice suits them because they’ve grown up with online communication, which they often find preferable to phone calls.
Like banks, but not quite, digital wallets are yet another trend that’s been growing stronger and stronger in the financial world, ever since 1998, when PayPal was created. Skrill and Venmo allow users to make seamless payments to both businesses and individuals anywhere in the world, and they’re usually free of charge. In 2017, 28% of all online transactions in the US were made using digital wallets and the industry is predicted to be worth $7,580 billion by 2027. Sending money to friends, especially in other parts of the world, used to be quite a hassle. The process was slow, and there were often fees associated with doing it. Yet, seeing an opportunity, these digital wallet start-ups took the chance to shake up the industry. In more recent years, digital wallets have introduced several additional conveniences and services that bring them a long way from the simple, barebones PayPal of 22 years ago.
Whether it’s to bring convenience or speed, or to simply reduce costs, it would seem that technology is having a major impact on the financial industry. Driven by a younger generation’s craving for simplicity and convenience, and powered by that same generation’s better understanding of new technologies, the digital financial revolution is growing stronger by the day.