“My six-month-old baby daughter is probably going to open her first bank account, not with an HSBC or a JP Morgan, but rather with a Facebook or Apple.” Financial technology (fintech) aficionado Henri Arslanian believes that in the future, banks will be obsolete.
Instead, people will turn exclusively to solutions such as Facebook or Amazon for their financial needs. He reasons that people are willing to trust Facebook with pictures of their children. And they trust Amazon to provide their daily essentials. It follows that there’s no reason why people wouldn’t also trust these companies to be in charge of their money.
Users are, in fact, already starting to do so since they can now send each other money through Facebook Messenger. This is just one example of how technology is upending the world of finance.
Financial tech changes such as cryptocurrencies are far removed from the lives of the average person. They are little understood at this point. But others are impacting our access to goods and services in our day-to-day lives. As they are doing so, the impact of fintech on business is bringing about some very real benefits, especially to small businesses.
As you might expect from its dependence on technology, fintech is a relatively new industry. Arslanian defines it as “the innovative use of technology in the design and delivery of financial services.” Put another way, when advances in technology start changing the way we handle financial transactions, we can call that fintech.
Fintech emerged to fill a gap. In 2008, banks were consumed with dealing with the fallout from the recession. They were unable to adapt their services to advances in technology and to people’s changing expectations. But technology progressed whether they were able to keep up with it or not.
Smartphones became ubiquitous. Consumers increasingly expect to be able to manage any aspect of their lives on their portable devices. This includes work, dating relationships, transportation (Uber), and finances. Fintech arose to meet a need the banks were simply not meeting.
The cryptocurrency bitcoin is an example of a fintech development that probably doesn’t affect the lives of most people — at least not yet. Created in 2008, bitcoin is entirely digital. No banks or government agencies regulate it, making it potentially groundbreaking for the world of finance.
While most people have probably heard of bitcoin by now, the average man or woman likely has no experience with it and does not really understand what it is.
But many of us have now made payments through Square, a company that enables the processing of credit cards through mobile. Companies are no longer restricted by location.
Credit and debit card payments are no longer limited to one machine that needs to be hooked up in one place. Now business owners can sell their wares anywhere they want to, whether across the world or in a local market.
Another advantage financial tech is providing for entrepreneurs is that it is making it easier for them to fund their businesses. Traditionally, startups had to turn to banks if they wanted loans.
