The current FinTech boom is rapidly changing the way we manage our finances, not just in the way we transact, borrow, budget or transfer every day, but also in the way we invest.
At CeBIT Australia 2018 leaders from four innovative FinTech companies discussed how digital disruption in finance has helped break down barriers in customer service and changed the way Australians and global consumers interact and invest their money.
Discussing their views as a panel were Jessica Ellerm, CEO & Co-founder of Zuper, Brendan Malone, Chief Operations Officer at Raiz, Tommy Mermelshtayn, Chief Strategy Officer at zipMoney, and Anthony Millet, Chief Executive Officer of BRICKX.
How FinTech companies disrupted an “impenetrable” industry
Technology is now an intrinsic part of personal finance and money management, and investment services that previously needed a human financial advisor can now be performed almost entirely without one.
Before, bank managers held the power of knowledge in their hands, and were the only experts who could advise on investment strategies. Today, you can get investment advice from robo-advisors (online companies that offer automated algorithm-based investment portfolio construction and advice), trade online, and even borrow on peer-to-peer lending platforms.
FinTech is disruptive because it challenges the way business is done. We benefit in many ways from the rise of FinTech, but as technology continues to play an increasingly larger role in finance, the disconnect between people and their money has grown.
For example, as cash became increasingly replaced by machines, plastic and the internet, it resulted in transactions that require less human interaction.
While this has made things more efficient on a day-to-day basis, it’s largely removed the consultative process between banker and client. People who don’t regularly keep in touch with their finances are also less likely to realise the value of investing, saving or budgeting.
Couple this with the fact that over the last few decades, banks have become largely distrusted institutions, and you’ve got a business landscape that’s ripe for disruption.
This distrust of banks has spurred the rise of FinTech startups globally, those that appeal strongly to Millennials. “The way people are leading their lives is fundamentally changing. Businesses that really understand that connection and build solutions for the next generation of consumers will win,” Ellerm said.
Taking a leaf from FinTech companies
So what solutions are FinTechs coming up with to appeal to customers today? Panelists shared their thoughts.
1. They’re making it easier to invest
Most people think of saving and investing as mutually exclusive and it’s not hard to understand why. Many banks impose a minimum of a few thousand dollars to start a term deposit for example.
Apps like Raiz, which allow you to invest with your spare change, are making it much easier for younger and lower-income individuals to get a headstart into growing their money without tying themselves to a long-term commitment.
2. They’re educating customers about good financial behaviour
Although consumers are able to access more data than ever before, panelists noted that not many people actually make use of – and therefore benefit from – the financial information that’s available to them.
That’s why, Malone says that one of the most important features of the Raiz app is a function that lets users see where they’ve spent their money, and decide whether or not to invest the spare change from their purchases.
“It’s making transparency accessible and people honest with how they’re spending their money, and that sparks smart conversations about good financial behaviour,” he said.
3. They’re creating alternative environments for people to invest
Companies like BRICKX is making it possible to invest in residential real estate with as little as $100, via virtual “bricks”.
Their business model, Millet says, is helping younger people feel more empowered about breaking into the property market, less daunted about home ownership, and more aware of how to capitalise on real estate opportunity.
4. They’re making it easier to invest consistently
ZipMoney, a credit facility that allows retail customers to purchase first and pay later, is now expanding into healthcare, helping customers to finance their gap payments (out-of-pocket medical expenses).
This allows patients to access the treatments they need without having to worry about having to pay thousands of dollars up front. This is money that could go towards regular investment, say to mortgage repayments on a second property.
There is no question that FinTech companies are leading in the disruption stakes, with consumers benefiting from such innovation in a multitude of ways. Today’s discussion evidences how FinTech is not simply making transactional finance more efficient and convenient, but how it is now actively working to improve the financial behaviour of consumers.
If you’ve got a great idea for a FinTech start-up and want to get it off the ground, our How to crowdfund like a pro e-book can help. Download your FREE copy today.