Over the years, people have become frustrated and disenfranchised with the banking sector. The 2008 financial crisis wreaked havoc on the trust and reliability that people placed on banks, leading to the traditional clientele of these institutions questioning their abilities and usefulness; the banks started to seem cumbersome and highly lacking in transparency.
Gone are the days when many assumed that big banks were the only options consumers had in banking, savings and foreign exchange.
Moreover, this trend has allowed for several start-ups within FinTech (Financial Technology) to disrupt the market. By capitalising on the distrust and lack of transparency in many retail and private banks, whilst harnessing new technologies for innovative features, greater access and a unique spin on banking that is simply unprecedented in this industry.
FinTech offers millennials and the technologically astute more flexible, streamlined and on-the-go, financial services; this is a revolution in the industry.
TransferWise, a classic Fintech case-study:
A company that comes to mind when thinking of the FinTech revolution; a company which Business Insider classifies as one of London’s highest-profile startups.
The organisation uniquely uses clever algorithms to match people who want or need to send money in one currency, with other people who seek to exchange in the opposite direction.
It, therefore, intermediates between the needs of individuals in a market and does so in a very cheap and consumer-friendly manner, which brings a fairer, simpler and cheaper offer against some of the more cumbersome and expensive retail banks.
For millennials and global individuals, it is extremely well-positioned in meeting their needs and fulfilling their endeavours. They offer this fast service at a cheap price, with amounts to around £400, costing a flat fee of £2 after that, with a fee of 0.5% on the amount sent. This proves to be transparent, easy and straight-forward, especially as TransferWise communicates with users on every step of the process.
It solves a complicated issue by allowing users to avoid working within long-winded currency conversions and makes transfers easier and cheaper. In other words, it offers an easier, flexible, and more attractive offer to users, which is why it has snatched £500m in customer transfers from leading banks and has seized 2% of UK-based remittances.
The Automatic Savings Bots
Automatic saving bots harness artificial intelligence, data science and algorithms to challenge traditional banking with what many consider inflexible, untailored, and rather boring personal finance.
These new apps, of which there are many, use smart technologies to understand a user’s spending habits which better manage and save money for its users and offer convenience, on-demand services, as well as flexibility. It analyses a user’s transactional data to devise sensible and safe amounts to put aside.
Users connect to these chatbots, often through Facebook, or an app developed by the start-up, and then the algorithms enable users to start saving, analysing and investing on a user’s behalf – often without the user even lifting a finger. With this simplicity, easy use and forward thinking ideas, it is no surprise, therefore, that it appeals to a tech-savvy generation.
Millennials are at ease; they can simply open Facebook to manage their finances, or sit back and let the machines save for them. This service offers them options, flexibility, and transparent services.
It is a more refreshing take in comparison to average ISAs, which take a very untailored and often only take a single amount of savings from your account. For these savvy saving bots, data is key. It provides the informational intelligence and backbone for smart algorithms, responsive chatbots and savvy coding.
The Rise of Finance Apps
Though this article has focused on two different things, it is important to remember that there are a host of various start-ups that are also revolutionising other aspects of banking.
For example, there are a number of neo-banks and challenger banks who directly challenge the larger banks. Notably, these new banks have drawn in millennials, who are moving away from banking’s “bricks and mortar branches, cheque books” and other ‘traditional’ banking styles services.
Monzo bank, for example, offers this new banking outlook. It offers instant balance updates and notification on spending for transparency, with handy insights, such as why a transaction was declined.
It is easy to use, as the app has a great interface and allows users to suspend the card if it’s lost or stolen. It is coupled with the fact that “one in three retail banking customers feel their bank’s mobile app isn’t as good as their online banking provision”, showing that unlike FinTech, traditional banks are not offering what millennials want.
FinTech has utilised artificial intelligence, algorithms and great ideas from budding entrepreneurs to banking and finance.
The vital blow that FinTech launched on banking is that it offers easy solutions for complex consumer banking issues; it brings them with the ethos of transparency, ease of use and openness. For this reason and some game-changing ideas, FinTech ventures have tripled in 2014 to $12.21bn.
However, it is not an easy ride for many start-ups, as Monzo for instance, is still trialling and running betas, as well as facing long queues and overhauls in its ability to offer cards to users.
It has put many people who want to use the app on hold until it can deal with the demand. While saving bots as well as TransferWise still rely on traditional banks to host and hold the current accounts that users use, they will never supplant banks.
Fintech may not have completely overrun the market, but it has disrupted certain areas and revolutionised them with ideas. Overall, by harnessing cutting edge technology, data and real-time innovations, they have swept the market and created services and new ways of banking, which have changed the way daily life. It is fair to say that these start-ups are here to stay and they will continue to revolutionise banking.