If you’ve spent any time banking or investing this year, you’ve probably already noticed that financial technology (FinTech) is beginning to consume more and more of the financial industry. Once isolated to high-tech cities like San Francisco and New York, FinTech has begun expanding across the United States and into our daily life. You’re probably already using it- ATMs and mobile banking apps, completely unknown to the public just ten years ago, are now virtually ubiquitous to every consumer and country in the world. And this trend is expected to continue expanding in the coming decades; according to research by Freedom Debt Relief, a report by PWC found that 59% of senior financial services executives anticipated that they would be expanding their FinTech to encompass more consumer needs, and about 52% of consumers stated that they would be using some form of FinTech “in the next few days-” a number up over 20% from just last year.
While it would be plausible to assume that the increase in the prevalence of FinTech would naturally come along with an increase in financial understand, data unfortunately does not support this conclusion. Current research supports the idea that, though consumers and businesses are more likely to use and more receptive to the idea of FinTech, they are basing their preferences upon a financial system that they themselves do not completely understand. Freedom Debt Relief has found that surprisingly, as FinTech continues to grow, financial literacy still remains in the dark; a new National Capability Study by the FINRA Foundation found that only two out of every three Americans cannot pass a basic financial literacy test rated for high school students. Globally, these numbers are even more depressing- about 35% of men and 30% of women are considered financially literate throughout the world.
Taking the time to inform yourself on the FinTech you will likely see in the coming years is crucial to maintaining a healthy financial future. Freedom Debt Relief has researched the financial technologies that we are most likely to see in the coming years- be sure to keep yourself educated both on new developments in FinTech and the basic core principles of finance will help you and your family to enjoy better credit and more opportunities. Here are a few of the new advancements in FinTech that you may see within the coming years and how they can benefit your financial health.
Digital lending is one of the first advancements beyond credit card payment apps that we are beginning to see, and it is expected to expand across the United States within the next few years. As banks move more and more of their activities online, they have created a huge amount of data related to which types of customer attributes(including annual household income, age, credit score, cash flow analysis, and many other factors) make up the ideal recipient of a loan. Using this data, banks have employed programmers to write algorithms that allow consumers to apply for a loan online and be approved or rejected within minutes. This allows banks to issue more loans by reducing the number of employees needed to physically analyze lending data, as well as helping consumers receive the loans they need without ever having to set foot in their bank. Digital lending also has the advantage of online reach, meaning that smaller banks and credit unions can now compete with larger banks who have more physical locations.
Another advancement that will be seen in the coming years is the use of biometric data to ensure that customer accounts are secure. Currently, accounts are largely secured with passwords that the user is able to set when they create their account. The problem with password security is that in order to be usable, the user needs to be able to remember the password. In an ideal world, users would create a difficult-to-guess password consisting of a string of random numbers and symbols, and write their password down in an area that only they can access it, pulling it out of hiding whenever they need to access their accounts. However, the reality is that users more likely use information that they can immediately pull from memory as their password- the names of favorite pets, children, and birthdays are often used as passwords. Freedom Debt Relief also reports that 73% of users use the same password for multiple accounts. This information can quickly and easily be accessed by criminals via social media, allowing them to hack into users accounts without their knowledge. Biometric measure has the potential to shift account access from being contingent upon what someone knows (their password or PIN number) to what someone is- selfies, thumbprints, and iris scans may be seen as early as one to two years from now as an extra security measure.
One of the most promising trends in upcoming FinTech is the use of customer data to synchronize activities. As it currently stands, customer data often exists in a vacuum; consumers may have multiple accounts that do not interact with one another, making it difficult for banks to access information that will help the consumer manage their finance. Personal finance management tools are being developed that will allow banks to synchronize consumer activity across a number of accounts. This is a win-win for both the consumer and the bank; the consumer gains information on their spending habits in order to form a better budget and curb spending, and banks can gain access that better serves customers. For example, banks that see a consumer saving for a car loan can offer a custom loan that fits a rate that the consumer can afford.
Freedom Debt Reliefl urges consumers to be vigilant not only in regards to keeping up with FinTech advancements, but also their basic financial literacy. Freedom Debt Relief has helped countless consumers work their way out of debt, build wealth, and make better financial decisions. If you would like to learn more about how to improve your financial health, Freedom Debt Relief may be able to help.