Many of us hate to feel we’re losing control. But what if, by giving away a little control over some things, we end up with more time for the activities and achievements that really matter? This is part of how people might benefit from the varied and rapidly expanding financial technology – or fintech – industry.
Fintech on an everyday level can be about having more choice when managing money – perhaps by adopting convenient finance-related apps for your mobile phone, using robo-advice to learn about investments, or having the ability to make payments or access cash anywhere, any time.
Many specialist fintech companies have emerged. Alongside traditional banks and financial services providers, they work to create technology that expands the ability to work with digital data connected to the movements of money around the world. Common goals include saving money as well as serving customers better.
New tech on the move
However, the fintech revolution goes far beyond this – and the whole technology market changes fast. Every day there are new apps or ways to pay as well as challenges to traditional banks and financial services providers.
One type of fintech is the robo-adviser. These are automated internet-based “money guidance” services, some of which aim to provide help for those who cannot afford or don’t have the time for a one-on-one appointment with a financial professional.
Further behind the scenes, organisations use fintech to develop better ways to manage financial transactions. An example is “digital ledger” technology blockchain.
Another area under development is artificial intelligence and “cognitive computing” – aimed at creating technologies that mimic the way people think. An example might be when banks use machine learning and artificial intelligence for things like high-frequency share trading, fraud detection or credit scoring.
Learning how to “behave”?
One advantage is that computer technology can be designed to defend people against common thinking traps we all suffer from.
For example, it can be easy to forget to follow through on decisions we have previously made. By building an automatic default choice into a mobile app that transfers a certain amount into savings each pay day, technology can help reduce this problem.
Meanwhile, technologies like blockchain are not only expected to save businesses money but can help develop trust between the parties to a financial transaction – important for businesses and to sustain positive relationships between people in all walks of life.
All of these advantages mean that traditional financial services providers, including banks, are increasingly partnering technology companies on solutions for banking and finance customers.
There are issues too, as with most things. One potential problem is that using more technology typically means introducing new security and privacy risks. Data and information about people and their money must be handled carefully by everyone in any financial transaction.
The fintech market is diverse, encouraging firms to compete to think up the best technologies. But how does the average person know which company to choose, out of a multiplying list of new brand names he or she may have never heard of?
Technology has also made it easier to have several different firms involved in a single transaction, sometimes spread across different countries. This can make it hard to know who exactly is responsible for fixing a mistake. In the IT industry, commentators often point out that people typically prefer having just “one throat to choke” when something goes wrong.
New laws and regulations about data handling are constantly developed, changed and improved to keep up with advances in the technology. But it’s clear fintech has risks as well as benefits.