Technology
Are fintech solutions and advancements broken? If so, what’s the fix?
Global Banking and Finance Review
Company
Fintech solutions offer convenience and innovation but face challenges in regulation and security. Research is key to navigating these advancements.
By Ethan Taub, Founder and CEO of Goalry
Goalry, the financial ‘Goal Mall’ and an entirely new Fintech experience that is set to reinvent personal finance, offers an insight into the world of current Fintech solutions and the challenges they pose, while offering guidance to how people might navigate these challenges.
Technological advancements have long been changing the financial world; from ATMs to contactless payments. As practically everyone is living within an online society and economy, financial tech (aka Fintech) has continued to snowball over recent years in terms of advancements and innovations.
New solutions and innovations offer many positives yet throw up certain challenges. Here are some fintech examples that many people are exposed to today, with some factors to be aware of.
Neobanks/online-only banks
Online-only banks are one of the newest Fintech solutions on the market. They offer users convenient banking that fits well into today’s 24/7 society. With the majority of these banks offering high-tech apps/platforms that implement algorithms, interactive technology, and, in some cases, AI, consumers can rest assured that they will receive a full banking experience at the touch of a button.
The lack of bricks and mortar banks also means that neobanks can offer lower exchange rates as well as low/no ATM withdrawal fees worldwide. This makes things that were once a concern for users, such as high travel fees, a non-issue.
Unfortunately, neobanks do come with some issues. Due to the innovative nature of these banks, legal and regulatory protocols are still in their infancy and may become an issue if consumers have a problem with their finances, app or bank in general. Furthermore, the human aspect of in-person banking can often make difficult transactions and banking issues far easier to complete or resolve. While many neobanks offer AI and interactive solutions, some customers may prefer to speak with advisors in person.
It’s always worth consumers doing their research into the most credible neobanks and looking at the features available to ensure they know fully how it operates – even to know if it strongly rated for its customer service is extremely useful.
Alternative finance
Alternative finance simply represents the financial channels and tools that emerge outside of traditional financial systems, think reward-based or equity crowdfunding, revenue-based financing, peer-to-peer consumer and business lending, and invoice trading platforms.
Alternative finance offers consumers who may have previously found it difficult to secure funding, such as loans, a way to gain access to the financial help they need. While users can often secure this financial help with lower interest rates – due to a broader spectrum of borrowers and applicant data – alternative financing also comes with a high risk of loss. In addition, alternative finance options are unfortunately a bigger target for criminal activity due to a lack of regulation.
When exploring alternative finance, people should again do their research. It is worth looking into the third party that facilitates the alternative finance and if it has reviews or ratings, the small print attached to it and considering the broad spectrum of alternative options on the market.
Being fully in the know about the finer details before exploring any finance option will help the person to make the right decision and know fully what they are getting into.
Cryptocurrency
Even though bitcoin was introduced well over a decade ago, cryptocurrency is still a relatively new concept to the mainstream market. Free from government interference and outside influence, the decentralised nature of cryptocurrency makes it an increasingly popular option for the general public and for bigger investors alike.
In addition to this, the very nature of crypto makes it practically impossible to hack – each cryptocurrency exists on the blockchain, which means that any attempt at hacking would take an immense amount of coordination, and is almost impossible
Crypto is also becoming a more viable option for businesses too. In some instances blockchain technology will enable the user to agree a contract and then automate their payment process, meaning that payment is assured for the supplier but the retailer does not have to pay for anything before the product arrives.
While crypto is becoming more and more viable in everyday life, there are problems to be wary of. As the market is decentralised, this makes the market especially volatile. If public opinion determines one currency to be worthless, prices can drop rapidly leading to big losses – and vice versa.
The decentralisation of cryptocurrency can also open this industry up to scam crypto schemes and coins, which can be a big risk for people investing.
While great for security reasons, the high-tech nature of crypto makes it not particularly user friendly. Unlike a traditional bank where you may be able to freeze your card but still access your money online, lose the key to your crypto wallet and you’ve lost your coins for good.
People starting out in cryptocurrency should look to reputable platforms and well-established currencies, to ensure that these are safe to invest money in. People also shouldn’t be willing to invest more than they are prepared to lose given the market’s volatility.
Artificial Intelligence (AI)/machine learning
Artificial Intelligence (AI) and machine learning is becoming more integrated with everyday life, in the tools and systems we use for shopping, working, education, and more. When it comes to the finance industry, algorithms have been integrated into a variety of systems to detect fraud, automate transactions, and provide financial advice. The integration of artificial intelligence also reaches into the user’s experience of the financial industry, automating services such as customer service.
The implementation of machine learning in the financial industry offers plus points such as reduced labour costs and operational efficiency, due to automation and the streamlining of processes. In addition, this kind of automation makes security systems far more effective by using complex algorithms to prevent breaches and hacking.
As with anything there are, of course, drawbacks to the increased use of tech. When a mistake is made in the traditional financial industry, it is far easier to hold someone accountable, this is far more difficult with automation and algorithms. AI has a lot of kinks to iron out before the financial industry and its consumers can solely rely upon it.
Anyone that has issues to their user experience when using fintech platforms, or there is a mistake in terms of finances or anything else, could potentially be an AI issue. People should contact the organisation they are dealing with for it to be rectified.
RegTech
Regulation and compliance is an expense in the finance industry – and any industry, for that matter – that is indispensable. However, that does not mean that firms have to stick with the same regulation and compliance systems that they have been using. RegTech is a fintech solution which offers companies a streamlined and cheaper way to regulate their operations, by using data, insights, and reporting technology.
Processes to combat money laundering for example, such as automated security requirements, have made Fintech a safer and more trusted industry. However, due to the early stage of this solution there are gaps in the tech that, if not rectified, may lead to big discrepancies and errors.
Similarly, to earlier advice, if consumers notice anything incorrect when it comes to their financial affairs, they should alert the company they are dealing with immediately.
These are just some of the examples of the way in which Fintech innovations are changing the financial industry for the better and the worse, some of these innovations require some ironing out, while others need major changes to make a significant impact on the industry.
While it’s recommended that Fintech consumers do their research before using any platform, another useful insight is to look to platforms that unify various innovations and advancements, and that cover multiple finance areas, to simplify managing finances.
The article discusses the current state of fintech solutions, their challenges, and potential fixes.
Neobanks are online-only banks offering convenient banking services but face regulatory challenges.
Alternative finance includes non-traditional financial channels like crowdfunding and peer-to-peer lending.
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