Financial Technology or “FinTech” has taken traditional financial institutions by storm. The fast-paced consumer and entrepreneur of today are no longer willing to accept the same old practices in the financial sector. They want the same streamlined conveniences that are available to them in other industries, and they want it at an affordable cost.
Entrepreneurs are causing headaches by offering rates that traditional service providers using outdated technology can’t keep up with. Senior executives at well-established, traditional financial service providers everywhere are on their toes, closely monitoring what change is coming next. Because entrepreneurs are free of strict regulations and can put forth bold new ideas, FinTech is advancing quickly. And with the influx of convenient FinTech alternatives, consumers are demanding more out of their traditional financial service providers.
Financial services like lending, payment processing, transfer services, and investing are being challenged and changed. Freedom Debt Relief wants you to be up on the latest trends.
Changes in Money Lending
Digital lending was the first big move that Freedom Debt Relief’s parent company, Freedom Financial Network, and others worldwide saw in the FinTech revolution. Home lending was one of the most popular, but the changes in lending were implemented beyond mortgages. While online lenders aren’t considered the newest trend in FinTech, lending changes are still widely talked about today.
By recognizing that both consumers and entrepreneurs were moving to the web, online lenders took advantage of all the data consumers provided. The online lenders then leveraged big data to automate the underwriting process, making it more efficient for customers. And that’s what FinTech was, and continues to be about—increased efficiency.
The biggest change was not in how the loans are underwritten, but in moving these services online. The customer now gets reliable and quick answers to their needs in the comfort of their own home. At the same time banks can lend from anywhere, allowing small banks to compete more effectively with large ones. Consumer lending has seen the biggest growth online but small business lending is not far behind.
Mortgage lending has seen many changes because of FinTech. With programs designed to automatically underwrite borrowers, lenders and borrowed are saving time and increasing reliability.
Changes in Security
With each digital service offered, internet hackers gain a new target. And the last thing a consumer wants is to be the victim of fraud. Advances in FinTech require companies to put a strong focus on improvements in online security.
Typically, when logging into an online bank account, users are prompted to answer a security question as well as provide a password. With a multitude of different accounts, it can be difficult to keep track of every password and people tend to rely on familiar names, birthdays, and pets. This opens customer security up to potential hackers that use both simple and sophisticated ways to guess account passwords.
In the future, biometrics could improve on this design by adding another layer of security. Biometrics would add an individualized piece of yourself into the security equation. Thumbprint, iris scan, or facial recognition are all examples of possible innovations that could be required to log into your online account.
As biometrics advance, there are many possibilities for how it could benefit the consumer.
Companies like Google and Amazon use data analytics everyday to better their business, but banks have yet to take full advantage of the surplus of data. Many banks have consumers with multiple accounts but don’t yet have systems in place to effectively communicate between the accounts.
Banks are working towards data aggregate systems that allow them to better use the data they already have. Local community banks work well because the bankers recognize the needs of the consumer. If big banks can more effectively organize data they may be better able to fulfill the needs of their customer.
An example of how data is being used more effectively comes in the form of personal financial management tools that have become widely available to consumers. In these tools, consumers can bring all their different investment accounts, retirement funds, and other financial data together to get a big picture view.
These tools can be a benefit to both the bank and consumer. The consumers can more effectively progress towards their financial goals with a clearer view of the big picture. At the same time, banks can individualize lending offers based on a customer’s portfolio.
Increasing Financial Literacy
One area in which Freedom Debt Relief sees that FinTech could be extremely useful is increasing financial literacy. In 2015, the world bank Gallup and George Washington University collaborated on a study to analyze financial literacy in the world. The report lists that only 57% of Americans were financially literate. This is an alarming statistic given that financial literacy can be the difference between a comfortable early retirement and being forced to work long past 65.
Despite the importance, personal finance classes are a rarity in schools. FinTech innovations can bridge the gap and promote financial literacy early. One such innovation is coming from the company Greenlight.
Greenlight has designed a debit card for children that allows parents to monitor and help their children with purchases through a mobile app. The parents can automate allowances as well as see exactly where the children spend money. Parents can also restrict which stores children can spend money at. The idea is to get children comfortable with finances early.
The United States would be well-served to use FinTech to strive to increase financial literacy. Financially literate kids mean a more financial savvy generation that can enact change. Learning to save, budget, and invest wisely can set our future generations up for sustainable wealth.
Freedom Financial Network: Fintech Leaders
Freedom Debt Relief’s parent company, Freedom Financial Network, is a progressive provider of financial services. The company recently passed the $7 billion mark in total consumer debt resolved. They have also issued $1 billion in consumer loans. As any trustworthy debt relief company should they strictly follow regulations from the Federal Trade Commission controlling the debt relief industry.