Financial Technology

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Month: December 2021

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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