Undeniably, fintech has helped improve user experiences, streamline processes, and enhance financial inclusion. According to Research and Markets, the global fintech market will grow at a compound annual growth rate of 23.58 percent between 2021 and 2025, with artificial intelligence leading the charge.
Financial institutions’ commitment to using fintech has also been met with favorable responses from consumers. Based on Ernst & Young’s fintech consumer adoption report, consumers have been quick to embrace fintech services, with 75 percent of Americans reporting using at least one fintech product or service. From tackling high-interest rates to completing day-to-day financial transactions, fintech has made it easier for an average person to manage their finances quicker and more efficiently than ever.
More convenient and accessible banking services
With the introduction of online banking through mobile and web-based applications, trips to brick-and-mortar financial institutions to check account balances, deposit or withdraw cash, and pay bills have been reduced in frequency or eliminated altogether. Today, users can transfer funds, deposit checks, and access their credit online, making it possible to perform just about any financial transaction anywhere and anytime.
With online banking, users can track their spending more efficiently since mobile applications display transactions and figures almost instantaneously, reducing the risk of errors due to delayed records.
Easier and more transparent budgeting
Many budgeting applications allow users to link their savings and credit card accounts depending on the banks they use, reflecting and recording real-time data. These apps even break down spending items into categories, such as mortgages, bills, food, and medical expenses. Users can assign the accounts these items are deducted from. Then, the apps calculate how much a user can save at the end of the month.
This platform gives users insight into where their money goes each month. They can analyze their finances and make more informed and strategic decisions in allocating income to afford their lifestyle and achieve long-term financial goals.
Automate financial transactions
Using online banking, users can automatically transfer funds to a separate savings account on a specific date each month, making it easier to set aside money for future use. Users can also set up different savings goals, such as travel and education, and assign a certain amount to set aside. The same can be done for recurring monthly bills. Some fintech services round up purchases and put the difference into a savings account or invest in exchange-traded funds.
Because using fintech apps allows financial institutions to reduce overhead costs, they are more amenable to offering higher interest rates on savings. With a higher interest rate on savings, people can counter the rate of inflation, which hit its highest level in 40 years in 2022.
Increased visibility helps users detect and fix financial mistakes
Fintech enhances the visibility of financial transactions and any suspicious activities, making it easier to identify trends and monitor financial history with just a few clicks. Most banking apps alert users to upcoming payments, overdrawn accounts, and new sign-ins so they can perform the appropriate actions to avoid losing money and fight off cyberattacks.
Fintech has also provided solutions to make online payments more secure. For instance, Visa, one of the leading adopters of fintech, uses machine learning to identify and stop fraud by monitoring as many as 500 risk factors. Other digital payment platforms, like Cash App and PayPal, have also implemented sophisticated encryption and fraud detection infrastructures to safeguard financial transactions from illegal attacks. As a result, users are more confident sending funds or purchasing goods online without the fear of losing money or personal data.
Manage debt and access better loans
Instead of reaching out to different banks and lenders separately to compare loan terms, users can now go to online platforms such as Credit Karma and LendingTree, input their information, and select from a range of loan offers that meet their financial status and goals. Increased data transparency has also allowed banks to provide loans to clients based on their credit scores and other creditworthiness factors, such as accurate and more comprehensive financial transaction records.
To manage multiple outstanding debts, users can try online applications such as Prism to consolidate debts and bill payments in one platform. These apps also allow users to schedule payments and prioritize debts to pay off first.
Furthermore, fintech has introduced new ways to obtain loans, such as crowdfunding and peer-to-peer lending. These platforms offer users the opportunity to borrow funds directly from other consumers with more attractive interest rates and better financing terms overall.
New opportunities to increase wealth
Fintech has also provided opportunities to use and earn new kinds of currency. The best example is cryptocurrency, a more transparent and secure form of digital currency that uses blockchain to record and verify transactions. Reduced conversions and intermediaries have made it possible to invest in crypto or use it to purchase goods and services without excessive fees and slow processing.