Jacob Parker-Bowles | Fintech

Financial Technology

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Setbacks of Using Fintech

Fintech has become a big part of our lives, even if we don’t realize it. Fintech essentially refers to any financial technology and can fall into something as simple as the banking app you use on your smartphone or more complicated such as companies that focus on things such as mobile payments or insurance. Fintech has made our lives easier in a lot of ways, but like most things, it’s not without its problems. Here are some of the setbacks of using fintech.

 

Data Security

The rapid growth of financial technology in Europe led to a 78% increase in the number of people using it in 2020. However, this growth has been accompanied by unintended consequences. One of these is the rise of cybercrime, in which attacks occurs at least once every minute. Unfortunately, many of the companies that are using fintech are also being targeted by hackers. Due to the rise of digital money, the number of people who rely on financial technology to manage their money has increased significantly. This has increased the amount of data that banks and other financial institutions can collect. Unfortunately, this has also led to the potential for data breaches at major companies such as credit bureaus and foreign exchange brokers, such as Pepperstone, an Australian brokerage company that had its own customer data stolen in 2020.

 

Regulations

One of the biggest challenges the fintech industry typically contends with are the regulations that come with it. Government regulations and fees affect fintech banks in a big way, and they typically end up straining the resources of the bank. Regulations such as the Dodd-Frank Act and the Financial Account Standards Boards’ Current Expected Credit Loss play a big role in how a bank utilizes fintech, to the point where some may provide their customers with more limited options due to wanting to avoid compliance fees and the like.

 

Keeping Up With Evolving Tech

While operating through digital platforms can be extremely beneficial and sometimes even necessary for the survival of many financial institutions, making the actual jump to digital platforms can be costly and risky. Financial platforms that haven’t made the jump to digital need to make an important decision; do they take the risk in order to keep up and stay relevant, or do they stick with what they know and not have the same offerings as other platforms?

 

There are many drawbacks to using fintech beyond the three mentioned here, but many would argue that the pros outweigh the cons. As we continue to move through this digital world, financial institutions will have to do their research to see if investing more into fintech will ultimately help them succeed.

How is Inflation Impacting Fintech

How is Inflation Impacting Fintech?

More consumers are choosing online fintech over traditional banks and credit unions regarding financial management. The decline in the value of fintech stocks over the past year has been quite steep. This sector includes companies such as digital payments and insurance firms. According to Forbes, a little over 10% of consumers pay for the services of these providers. Most consumers pay for the services of fintechs through monthly subscriptions or membership fees. A third of those aged 21 to 55 subscribe to these services, while only half spend more than $10 a month. Despite the recent market turbulence, driven primarily by runaway inflation and rising interest rates, the decline in the value of financial technology stocks has been considered mild by market observers. However, analysts believe that the sector’s slump is a necessary step to improve the industry’s stability.

The term financial technology refers to various ways financial firms can improve the efficiency and accessibility of their operations by using software. These businesses typically use that technology to automate or adapt traditional financial services. Neobanks are online banks not based on physical branches. Instead, they offer a wide range of financial services through their online platforms. These nonbank neobanks do not have the same broad range of offerings as their traditional counterparts. Many of the founders of financial technology companies are not bankers; instead, they tend to focus on the user experience of their platforms. Most do not have a deep understanding of the financial services industry. One of the main factors that contribute to the profitability of these firms is the transaction fees that they receive when customers use their services. Financial technology’s rapid emergence and evolution has created new opportunities for banks and other financial firms. These businesses are constantly looking for new ways to improve their operations and meet the needs of their customers. Due to this innovation, traditional banks are forced to rethink their approach to operating.

According to a study conducted by Simon-Kucher, the world’s neobanks have a combined population of over 400. Out of the top 25 firms, only two have managed to achieve profitability. These firms typically make less than $30 a customer. The study also noted that the number of neobanks globally has increased over the years. Out of the 400 or so neobanks currently operating, it is predicted that around 300 will not be here for long. The value of financial technology stocks has been declining steadily over the past couple of years. As of 2022, fintech stocks are down around 25% from their peak, underperforming the Nasdaq-100, down more than 26% year-to-date. Financial technology’s rapid emergence and evolution has created new opportunities for banks and other financial firms. However, the flood of new financial technology companies backed by SPACs has all but evaporated. Leaders such as PayPal Holdings, Block Inc., and Robinhood Markets have lost more than 60% of their value since October 2021. One of the main factors that prevent financial technology firms from turning a profit is the vast amount of money they give to their customers. The key to profitability for these firms is to move away from being free and toward being fee-based. The potential of financial technology companies in traditional financial institutions is immense, considering the various sizes of financial institutions in the industry. Aside from being fee-based, financial technology firms can also benefit from the advantages of being backed by banks. With the ability to offer high-interest deposits, traditional banks can compete on a scale most neobanks cannot.

The Future Technologies of FinTech

Financial technology is growing at historic rates as society weans itself more to digital tech. The emerging technologies we have are changing the connections many have gotten used to. Internet signals and machine learning enable society to innovate at a tremendous rate. These types of innovations are also influencing the financial markets. Generating more investors and giving them quicker transactions and live data are ways financial technology (FinTech) evolves. 

ESG

Businesses around the globe are being judged based on their relevance to the modern world. This ESG model covers environmental, social, and governance points to scale. This model is used to rate a business’s investment potential. The direction of FinTech is also partly based on this trajectory. How social or environmentally friendly businesses are is important today. These factors will stand regardless of the individual innovation a business makes in finance. 

Cloud Efficiency

Banks and financial institutions still have advances to make regarding their use of cloud technologies. The digital infrastructure of the financial world can only remain relevant if it’s integrable. In this way, “integration” is your adaptability to the remote and wireless society. As far as the actual cloud, these services make digital networks faster, safer, and with more utility. Storing data, accessing it, and then assigning it roles are pivotal tasks in finance. 

Blockchain

Blockchain not only presents us with the potential of cryptocurrencies. The challenges that financial institutions face on the web are solved with a layer of blockchain. The infallible record kept by blockchain improves how banks and financial professionals account for the money. The transactions of this algorithm can’t be infiltrated, reverted, or decoded. This level of safety has value. The blockchain code works on automation and even AI machine learning today. 

Artificial Intelligence

Artificial intelligence is an emerging trend in technology, and it will also be used to improve the world of finance. Not only does this tech evolve as it receives more data, but it gives blockchain an extra layer of security. The speed AI calculates it to move faster than active hackers.

How To Promote Fintech Through Marketing

In recent years, the use of financial technology, which is also commonly known as fintech, continues to gain popularity. According to a recent study, nearly 90% of Americans now use some form of fintech to manage their finances, making it necessary for businesses to adopt it. Its efficiency and ease of use for customers have made it a common approach for countless businesses. While there are an array of benefits for customers to utilize fintech, it is still an important thing to promote through marketing efforts. The following are tips on how to get the most out of your marketing efforts with fintech. 

Create A Plan Of Action
One of the most important steps to take when first beginning is to create a plan of action for your marketing efforts. Marketing plans are often underutilized but are an essential way to determine one’s goals and the approach to meet those goals. Things to consider when creating the marketing plan are:

  • What is your target audience?
  • What mediums will you use to reach your target audience?
  • What approaches will you use? This could include digital marketing, print marketing, or public relations
  • What are your main goals with your marketing objectives?

Focus On Educating Your Target Audience
A mistake that many businesses make with their marketing efforts is the focus on marketing only. For something like fintech, the goal should not be to market but to educate your target audience. In order to achieve this, your marketing plan should include a focus on increasing awareness and a general understanding of fintech. This can be done through the creation of monthly blog content, newsletters, and social media posts, to name a few. By focusing on educating your target audience, you are likely to become known as a trustworthy resource within fintech in the future. 

Utilize Social Media
Over the last 15 years, social media has continued to take the internet by storm. Social media has become a go-to for news. It has also become a resource for customers to learn more about businesses. Use social media to reach your target audience on a regular basis, especially if the specific audience uses social media on a daily basis. In doing so, you can increase your overall reach while increasing awareness of fintech.

How To Forge A Career In Fintech

Fintech encompasses a broad range of interests that incorporate the use of technology in managing finances. This involves anything from eCommerce to the use of mobile apps for individual businesses. Even though you may have the skills needed in finance, you will also have to develop knowledge and expertise in the adaptation of technology before you can pursue a fintech career.

Technical Skills
The technical skills you will need to develop through education and training will depend on the type of fintech career you want to develop. For example, you’ll need to have graphic design skills and an understanding of HTML programming to develop a career in eCommerce and web design. If you want to develop mobile apps for businesses, you’ll need to know how to write those types of programs. You can always evolve your career in the future, but you should start with a basic understanding of the skills you will need.

Soft Skills
Many people in the fintech industries end up pursuing entrepreneurial projects. For that reason, you should have good communication skills, a natural ability to lead, and an ability to interpret analytics from multiple sources. You should also be good at problem-solving, and you should be able to perform efficiently within a team. These soft skills will help you to be productive in any environment, allowing you to work well for others or succeed with your own startup.

How to Start Your Fintech Career
As previously mentioned, you should focus on a particular niche within fintech to help you determine what hard skills you will need to develop. Even after you get basic education and earn your degree, you will have to keep up with new advances as they emerge. You may also want to add to your qualifications by earning another degree in a different fintech niche. Continuing your education throughout your career will add to your skillset and make you more valuable to potential employers.

Just like any other type of career, it’s also important to start networking as early as possible. Look for others who have an interest in fintech or those who already have careers in this field. By developing a wide and diverse network, you’ll learn more, hear about a new job or investment opportunities, and you’ll find new ways to expand your network even further.

How to Help Eliminate Financial Stress

There is no doubt that financial stress can have a severe impact on not only our personal mental health but also on our relationships. In fact, according to a study conducted by the financial firm TD Ameritrade, 41% of divorced Gen Xers and 29% of Baby Boomers say that their marriages ended due to disagreements about money. While having your personal finances in order is no guarantee that you won’t still fight about money with a partner or spouse, it can go a long way towards creating your own good mental health and wellbeing. Here are three tips to help eliminate financial stress.

 

  1. Track your spending

 

It is a sad, unfortunate fact that in the age of credit and debit cards, many people have no idea how they actually spend their money or where it all goes. Before you can create a realistic budget, you need to understand and identify your personal spending patterns. While that $6 latte each day may seem like a small purchase, over the course of a month they can add up to almost $200 and maybe even more if you are inclined to be a generous tipper.

 

  1. Create a realistic budget and stick to it

 

Creating a budget is easy, creating a realistic budget that actually accounts for your legitimate spending habits and patterns is much harder. This is partially due to the fact that some of your bills will vary from month to month. While it is fairly easy to budget for static bills like your rent or mortgage or car and insurance payments, creating a realistic food or entertainment budget may be more challenging. Credit cards make it too easy to spend more than you make and making only minimum monthly payments makes it easy to just keep racking up that credit card debt. A budget can help you begin to spend less than you make, but only if you stick with it.

 

  1. Create margins

 

Studies have shown that 40% of Americans would struggle to come up with even $400 to pay an unexpected expense. While spending only what you make is a good first step, your stress isn’t really going to go away until you create some cushion for the unexpected. While not spending more than you make is a good first step, ultimately the goal is to spend less than you make.

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Increasing your Understanding of Fintech

Financial technology, also known as fintech, is the implementation of technology in the financial industry. The purpose is to improve the ways that financial services are created and delivered to consumers. Technology has also increased the availability of financial services, such as loans and investments, to every member of the public. There are several methods recommended to become more knowledgeable about the emerging field of fintech.

 

Improve basic skills in finance

 

Someone who knows nothing about finance cannot expect to become a fintech expert. The first step is to develop a basic knowledge of finance in a diverse range of topics from stocks to lending.

 

Learn the different sectors of fintech

 

Once the basics of the financial industry are learned, the next step is to learn about key fintech sectors. The most well-known areas include online payment systems, blockchain, digital lending and digital wealth management. Since millions of shoppers are buying their products and services online, the use of online payment systems has exploded in the past decade.

 

Blockchain technology has become more advanced as people exchange vast amounts of private information over the Web. It is commonly used in cryptocurrency to conduct financial transactions without increasing the risks of fraud.

 

Enroll in short-term courses

 

A short-term course is designed to advance a learner’s skills in every major fintech topic from blockchain to Python programming. A course also gives a beginner firsthand access to experienced fintech professionals. Students can receive hands-on training in the field and start building their financial portfolios.

 

Review fintech websites

 

It’s recommended that starter and experienced fintech professionals begin to track financial trends and statistics carefully. Every day or once a week, they should review websites that contain the latest news about financial technology. There are numerous blogs, sites and newsletters that provide regular updates.

 

The years 2000 from 2021 saw massive changes in the ways that consumers use financial services. Many individuals and business owners had no choice but to use online banking to transfer funds and perform daily financial tasks. Financial consumers are becoming more interested in using machine learning and artificial intelligence. In addition, fintech sector is constantly expanding to include new technology areas and skills. So, becoming a master in fintech starts with a solid foundation based on basic professional skills and knowledge.

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Fintech Trends for 2022

Arguably the hottest sector on the planet, fintech continues to roar while 2022 promises to be a banner year for new business models based on financial technology.

 

What can we expect in the coming year?

 

A Year of New-Traditional Collaboration

 

Ever since fintech application began to impinge on the territory of traditional banking, industry observers have been wondering how old and established banking institutions would react. For example, a young entrepreneur can now skip a bank entirely and raise money via a fintech crowdfunding campaign. That same entrepreneur might also ignore a bank in favor of establishing his or her own fintech merchant account.

 

But the truth is that big banks have never been worried about fintech eating their lunch – just the opposite. They are embracing it and see it as the future of banking. They’re not going to fight fintech, they are going to collaborate more. Established financial institutions see fintech start-ups as a rich source of new revenue streams and as a way to enhance their own mission.

 

The major fintech buzzword for 2022 is: “Collaboration.”

 

Payroll Fintech

 

To date, fintech has been focused on developing payment infrastructures between consumers and sellers. Now 2022 is expected to be the year when fintech enters the payroll sector in a big way. Employees can now expect to see compensation options like “salary on-demand,” and early direct deposit into their personal fintech set-ups. It’s going to make collecting a wage or salary far more fluid and convenient.

 

Buy-Now-Pay-Later

 

It’s not a new concept, but when applied to fintech, buy-now-pay-later is simply huge. New operators like Afterpay and Klarna offer multiple ways for people to buy what they want right now with no money upfront. The system is set up for automated payments to be made at periodic future dates. Consumers love it. Those merchants who are adopting buy-now-pay-later schemes are enjoying explosive growth.

 

Digital Banking Only

 

Digital banking has been with us for some time. However, in terms of fintech, we’re talking about virtual banks. These are banking entities that have no brick-n-mortar component. Fintech digital banking is a creature of cloud computing. They are “free-floating” platforms that are likely to make stolid granite bank buildings with marbles floors and gigantic stainless-steel vaults a relic of the past.

Jacob Parker Bowles Fintech

The Different Categories of Fintech

Fintech is an umbrella term that means more than one thing. By marrying both finance and technology, fintech has created multiple company categories. International money transfers, personal finance, and insurance are just a few branches.

International Money Transfers
International money transfers are used to move money from one bank account to another. This can be achieved on an international level with certain fees. Fintech makes it possible to wire money in a secure fashion for the privacy and safety of its users.

Traditional money transfers take longer to process without fintech. Not only is the transfer of money delayed, but traditional transfers often have higher costs. In the past, individuals have paid as much as 8% for a single transfer. Financial software improves both time and savings for international payments. 

Personal Finance
Budgeting can be a complex process. Because expenses are unique to the individual, many people have used financial advisors in the past. These advisors can help organize spending by creating visible data.

With fintech, certain apps are capable of offering individual advice. By using easily accessible forms of visual representation, graphs and databases help more people save money. This is an ideal way to use software for retirement planning.

Borrowing Money
Companies within the fintech umbrella now offer consumer loans. By applying online, individuals save time between the application process and the loan itself. This can be incredibly valuable for those who need money right away.

Certain companies can assess an individual’s credit online. Through automation, these companies can attend to more borrowers than a traditional bank. 

How Has Fintech Entered Into The Insurance Business?
Insurance has been affected by fintech. Although it is not in the same industry like finance or tech, the software can benefit insurance companies.

Fintech apps can help those without insurance coverage by allowing time-specific benefits. If an individual needs to borrow a vehicle for only one day, specific apps make it possible for short-term coverage. 

The insurance industry is a complex business with well-known organizations. Fintech companies will usually partner with established insurance businesses for regulation purposes. Fintech in the insurance industry is relatively new but is expanding on a regular basis. 

Fintech companies design software to help manage money. This is beneficial for both individuals and large organizations. By using advanced software to manage money, financing can be done in almost any location at any time.

Jacob Parker Bowles Millenials Finance

Millennials And Fintech Are Driving A Major Change In Personal Finance

Personal loan balances are growing at a staggering rate. TransUnion reports that the amount of unsecured personal loan balances in the USA topped $156 billion in 2019. Not only is the amount of unsecured personal loan balances topping new heights, but the number of personal loans taken out is also reaching new highs. 22.5 million unsecured personal loans were taken out in 2019, a sharp increase of over 16.2 million unsecured personal loans in 2019. 

The increase in loan balances is driven by both the demand and supply side for unsecured personal loans. Financial technology firms are driving the growth in the supply of personal loans available to consumers. TransUnion data estimates that almost 40% of all unsecured personal loans originated from fintech companies in 2019. In 2013, TransUnion reported that a paltry 5% of personal loans came from fintech firms. That is an almost 800% increase in only six years.

Experian puts the number of personal loans originating from fintech companies at an even higher figure than TransUnion. They report that about half of all personal loans come from financial technology companies. Traditional banks and credit unions make up the remaining share of the unsecured personal loans market, with banks having about a 30% share of the total market and credit unions taking the remaining 20% share. 

The demand side for unsecured personal loans is being driven by a key demographic that is coming of age now. Millennials are that key demographic, and they seem to be taking out much more debt in the form of unsecured personal loans than previous generations. While millennials are taking out more loans than ever before, consumer research by CB Insights reveals that this demographic is incredibly picky about where they decide to borrow money. The CB Insights study commissioned by Bank of America found that Millennials are less trusting of traditional banks and prefer a faster and more convenient way to be approved for a loan than by going through the traditional banking route. 

A close look at why millennials choose fintech companies over traditional banks and credit unions for financial services and loans reveals additional vital insights. They strongly prefer the fast and intuitive online interfaces that fintech companies offer for personal loans. However, Millenials’ love affair with fintech companies extends beyond just loans. This generation is increasingly using fintech companies to save and invest too. The low barriers, ease of use, and low fees to investing offered by fintech companies such as Robinhood and Stash make them a favorite among millennials for saving and investing. 

Millennials are driving a shift away from the traditional branch banking and lending experience to one increasingly driven by technology. The shift is only expected to grow. Banks and investment companies would be wise to pay attention to this trend as their new customer base increasingly votes not only with their voice but their dollars as well.

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