Today, users don’t have to rely on traditional banking institutions to manage their money. FinTech apps are taking this responsibility away from the establishment and putting it in the hands of consumers.
So, how are FinTech apps changing, or at the very least, influencing consumer habits? There has been a seismic shift in how users interact with their financial assets, from developing awareness and providing solutions to economic insecurity to enabling saving, investment, and spending in multiple alternative assets.
This article will run through three core areas that FinTech apps are disrupting: budgeting and expenses, lending, and diversified assets. Finally, we’ll ask if we’ve reached a point where new FinTech applications could overtake traditional banking systems.
FinTech Apps for Finacial Empowerment
One of the core reasons many people turn to FinTech is to become more financially empowered. By this, we mean more aware of how much they are spending, where, and why.
When consumers rely on bank statements to track their outgoings, it can be easy for the figures to become confusing. Even though many well-established banks now provide features, including alert functions, to make it easier to manage money, they can’t compete with dedicated FinTech apps.
Apps like Mint and Emma enable users to intuitively track expenses and manage their finances. Why? Because they are designed to do so. Instead of simply appearing as an add-on to an existing service, budgeting and expense apps are adapted to complete these tasks simply and quickly.
Users are moving away from the financial advice and guidance traditionally offered by banks. Instead, they are becoming more confident taking these decisions into their own hands and making informed decisions based on facts. In many ways, FinTechs are successful because they take something complicated that used to require professional help and make it accessible to users.
A New Way to Lend
Apart from budgeting and expense tracking, FinTech apps enable consumers to experiment with alternative financial activities. One of the most significant is alternative lending. Today, consumers can choose from many loan options and neglect traditional banks altogether.
A particularly innovative method that is increasing in popularity is so-called P2P (peer to peer) lending. Various apps like Lenme enable users to lend to each other directly, bypassing financial institutions altogether. P2P lending like this provides tremendous flexibility, personalization, and opportunities for potential investors.
Beyond this, recent FinTech developments have brought the field of micro-loans to the app marketplace. One of the leading examples of a micro-finance app is Tala. Like other micro-lending apps, Tala brings micro-finance loans to the historically underserved and enables users to borrow small amounts with just a few clicks.
Borrowing from banks has become increasingly more accessible, with many institutions providing split-second decisions on loan applications made online. However, the flexibility and breadth of alternative loan options could pose a real threat to existing systems.
It’s impossible to ignore the monumental rise of cryptocurrencies. And crypto apps are fast becoming some of the most popular in the FinTech space. In recent years, blockchain and crypto assets have been increasingly legitimized. Despite strict regulations and some persistent backlash, most jurisdictions consider cryptocurrencies legitimate financial assets.
With this growing acceptance has evolved a swathe of applications that make buying, trading, and investing in crypto assets incredibly easy. The blockchain industry is no longer the preserve of tech-savvy forward-thinkers. In minutes, anyone can download a trading app, purchase crypto, and become part of this alternative economy. Even some aggregated banking apps like Revolut provide storage and buying options for certain cryptocurrencies.
Despite the turbulence of the crypto market, people are continuing to invest at a mind-boggling pace. At the dawn of 2021, there were an estimated 300 million crypto holders and over 18,000 businesses accepting crypto payments. As we enter 2022, we guess that the flood of users inspired by the meteoric growth of Bitcoin and the opening of crypto trading desks by some of the world’s most influential banks, such as Goldman Sachs, will increase exponentially.
What Could This Mean For The Future of Banking?
There’s no doubt that the rise of FinTech apps has had a profound effect on the traditional banking industry. According to one recent report commissioned by the app marketing group Liftoff, the number of FinTech app downloads increased 15% during the height of the Covid-19 pandemic. This growth was more than ten times that experienced by traditional banking services.
Of course, the pandemic brought with it a great deal of financial uncertainty, and it’s not surprising that many users were encouraged to take personal spending more seriously. However, the ability for FinTech apps to provide this certainty and not banking institutions is significant.
Could it be a trend? Perhaps. Yet, as more people become familiar with the alternatives to banking, this trend could well overtake third-party financial institutions that don’t provide the same level of autonomy. Ultimately, it will come down to trust. How much a user trusts their financial decision-making. How trustworthy the FinTech apps are providing the means to do so. And conversely, how little trust users may have in traditional banking alternatives.
Still, there is a powerful argument to support traditional banks along the lines of trust. While banks are subject to strict banking codes and transparently display the way they access and use consumer data, many FinTech apps do not. The extent to which apps use consumer data may be enough to ensure that many users stay loyal to traditional financial systems.