You can’t take two steps from your wallet to the ATM any more without someone tossing out the R word. You know what I mean — Revolution. And it seems there’s one going on right now in the financial world, what no one ever thought possible.
I happen to think that word is used much too often and might be in danger of losing meaning. In other words, calling the fintech paradigm shift a revolution might be stretching it a bit. But things are certainly changing. Here are five ways fintech companies are changing the world, and there will never be any turning back.
Five Ways FinTech is Changing the World
- Changing how people send and receive money — People have been sending money through the Internet almost since Day 1, but until PayPal made it cool, the numbers were very small. Today, almost everyone does it, But some companies are taking it to a whole new level. Companies like Square and Venmo allow ordinary people at a garage sale to transfer money without going through an intermediary. Log on, send payment, share a smile. Easier than reaching into your pocket for a fiver.
- Changing how people save and invest for the future — Remember the days when you had to call your broker if you wanted to move money from one fund to another? Those days are over. Robo-advisors allow ordinary investors to manage their investments by algorithm. You set your preferences and the technology will watch your bottom line. Other tools allow you to manually manage your own accounts without the need for a professional, which saves on transaction costs and gives you more control.
- Changing the relationship between money and technology — FinTech is changing the world so fast that even the biggest banks are investing in it. But the exciting thing about the relationship between money and technology isn’t so much what you can do today, but what you might be able to do in a decade. NASDAQ, IBM, and other global enterprises are playing around with Blockchain, the conduit that makes transactions with digital currency Bitcoin possible. Never mind Bitcoin; these companies are paving a path that will allow anyone anywhere to transfer any item of value through a public ledger. You might some day buy your house, your car, and even your insurance products straight from the seller through a secure digital transfer system.
- It’s making the global economy smaller — If you thought the world economy was small enough because the U.S. dollar was the primary reserve currency, then consider this: You can now send money from China to the U.S. with no intermediary. Contrary to what Samuel L. Jackson says, it’s not what’s in your wallet that matters. It’s how you use your wallet.
- It’s creating financial niches never before imagined — Crowdfunding anyone? how about marketplace lending? If you want to kill a legacy system, the surest way is to connect the end users. Cut out the intermediary and you’ve got a paradigm shift that can’t be reversed. That’s what FinTech has done with rewards-based, equity-and debt-based, and donation-based crowdfunding platforms. There are now thousands online and being used all around the world, connecting givers and takers, borrowers and lenders, and the rest of us. Capitalism has been freed from its chains.