By: Kerrick Henderson, Alex Cable, Syd Eyre
What is Fintech
Fintech is one of the most exciting and newest trends in technology. Many companies are making large bets on the industry and its future applications. So far, the field ranges from brokerage accounts and simple trading, all the way to advanced new forms of banking that create credit systems between user bases. At its essence is combining new technology to aid the financial system and create new opportunities. This allows the system to break away from its current restrictions and venture into new areas that can create more growth and provide forms of banking to more people.
Large Companies
The first major companies to put into practice the developments in online banking are J.P.Morgan, Bank of America, Ally, and Varo. The last two are entirely online and do not have any physical locations. Ally and Varo have seen rapid growth in the past couple of years and expect much of the same moving forward. They operate in traditional checking and savings accounts, as well as offering Certificates of Deposit (CD). The accounts typically bear higher interest rates than traditional physical banks due to their smaller overhead and ability to manage money and accounts in a more effective way. While Ally and Varo don’t have the same financial backing and network as J.P.Morgan and Bank of America, they do have flexibility in implementing new technology and taking more risks. J.P.Morgan clearly has the upper hand when it comes to investments in technology and size of the firm. It is the largest bank in the US by assets and they spend over $10 Billion a year on just technology. Adding to this, they have recently announced a new office in Palo Alto, CA that will be dedicated to only Fintech. This move is designed to encourage innovation and focus on the future of the industry.Startups
The second group of key players in Fintech are the new brokerages. These are companies like Robinhood, Acorns, and Stash. Robinhood is fairly new to the fintec scene, but they are already one of the biggest players. They offer a new way to trade securities, derivatives, and some cryptocurrencies for free. Their tech has had some issues in the past, with multiple downtimes during trading hours leading to millions of dollars lost and opportunities missed. Acorns and Stash are similar apps that allow individuals to save money for retirement by investing extra cash into indexes and ETFs. Both of these apps have already had tremendous impact on the financial lives of the people that use them, with both getting near perfect reviews.Impact
Nearly everyone’s quality of life is directly impacted by their finances, and having the freedom to interact with them how they wish thanks to Fintech has benefitted many. This has forced many of the traditional banks to adapt to the new ways of doing things, as was mentioned with J.P.Morgan earlier. We’ve also seen companies such as Capital One move toward an online model as nearly all of their business can now be conducted via either phone or computer. This has lead them to change their traditional brick-and-mortar banks into “cafes” where customers have a place to feel comfortable as they transact their business digitally. Going forward, we will most likely see more of the older institutions be forced to change their ways or go out of business. Most trading brokerages will be forced to lower their commission rates, as many already have, and more financial advisors will struggle to compete with the apps that help people save once the general population is more accustomed to them. Thanks to the freedom Fintech grants the clients of its users, it is unlikely we will see a slow-down in its growth any time soon. The following infographic shows the path the industry has been on and how it is poised for future growth.
Questions
Have you used any sort of fintech app before (i.e. Robinhood, Square, Acorns, Mint, or online banking) and if so, what has been your experience?
Have you ever been locked out of accessing your money due to a technological error? If so, what was your reaction and how did the company at fault make it right?
Where do you think Fintech will go in the future? Do you believe it is possible for the industry to continue growing at the rapid rate is has been?
I really like your topic. I've never used trading apps like Robinhood but Square is something I am familiar with just from a consumer standpoint. I think the greatest benefit of Fintech is how accessible it has made a ton of services for the average Joe. It especially makes the lives of small business owners a whole lot better and promotes growth and spending which benefits all of society. I think Fintech growth will plateau but not for another decade or two. Most of the technological errors I encounter are my fault so I can't complain about Fintech reliability.
ReplyDeleteHello, I really enjoyed your article on fin tech and the impact it has had on the consumer market. I have become hesitant to using these apps just because of how new they are and wanted to make sure they were running smoothly before I invested my hard earned money into them! One of my biggest concerns with using one of these apps is how much information is required by the user and the security of the apps themselves. I have a hard time putting my trust in an app that would have access to my social security number and various bank accounts or card numbers.
ReplyDeleteOverall, I think you guys made some very valid points throughout your article about the impact that they have had and the growth the fin tech industry has experienced in the recent years. In the future, I believe that fin tech will be dominant in the industry it will just take time for people to put their trust in the applications themselves.
Thank you for your thoughtful and educational article on Fintech. I have always been interested in Fintech. I have now been using Robinhood for over a year now. I really enjoy my experience using it. I have never encountered any problems when using the application no matter on my phone or using the website on the laptop.
ReplyDeleteI think Fintech has a bright future. There is a lot of attention paying to Fintech and I believe the quick development of Fintech will continue.
This post was very interesting! Now that banks are paying high salaries to compete with tech firms for the best data scientists and developers, Fintech is an incredibly large space with a lot of potential! I’ve used Robinhood, Mint, Acorns, and a variety of other Fintech products, I’m very excited for what the future brings as finance and technology become continually more intertwined. I’ve never experienced any severe problems with any of the major platforms, though I found my rate of return on Acorns to be quite low.
ReplyDeleteIn the future I have concerns about the implications of artificial intelligence, as our government has currently made no efforts to regulate this rapidly expanding industry. There are thousands of highly talented tech teams working to apply technology such as Blockchain and Machine Learning to financial services. Regulations are far outdated to limit the potential risks of technology interfering with privacy or creating opportunities for fraud.
Thank you for sharing! I currently use a fintech app, Acorns, and have had a great experience. Acorns has been beneficial for me because I have been able to invest my "Spare change" each and every time that I buy something. I have personally never experienced a technological error when receiving or handling my account money, but have heard of other instances in which my friends have.
ReplyDeleteIn addition, after working at Goldman Sachs as a summer analyst last summer I realized how big fintech is going to become in the near future. The traditional finance experience is slowly being revolutionized and transformed to match the digital trends.