During the last decade, technology has evolved so significantly that businesses across all industries are required to redefine their models.
One of the most significant changes brought about by the digital age is the paperless movement that emphasises a reduction in hierarchy, logistics and time.
The paperless movement has quickly replaced the standard old-fashioned paperwork that was once required before achieving an end-goal. These days, the internet removes the majority of hassle while enhancing your experience in conducting business and meeting consumer demands.
The financial technology (FinTech) industry is the latest area that has been affected by the rapid evolution of the internet. It is now immensely easy for you to execute your financial affairs over the course of a few clicks on software that is specifically designed for it.
Here’s how FinTech companies are leading the market for consumer lending.
Where is FinTech trending?
According to tradingeconomics.com global macro models and analysts expectations suggest consumer spending would reach $258 million AUD by the end of this quarter and would stand at about $264 million AUD within a year. This is then projected to reach $276 million AUD by the year 2020.
According to Life and Business coaches from Jeanine Sciacca International, “with the strengthening of consumer’s buying ability, financial technology companies come into play with wealth management and microfinances services that small businesses and individuals might need”.
Out of all sectors that the financial technology industry covers, personal loans currently take the spotlight following the Global Financial Crisis (GFC) in 2008. As banks struggle to keep the supply of derivatives flowing, consumers are left to fend for themselves without the security net that banks essentially have to be responsible for.
As a result, digital marketplaces have picked up on the shortcomings of banks and third party financial services are beginning to fill the role traditional banks used to play.
Financial technology companies hold the upper hand in this industry because of their low-in-cost set up and easier regulatory compliance checkmarks. As new players, governments around the world have yet to set boundaries that drag down their agility in practicing business. As a result, financial technology companies also tend to focus more on customer service. They strive to create the most user-friendly service so they can win an even bigger share of the market.
What Speed is the FinTech Industry Growing?
According to a 2019 report by Accenture Global Financial Services, financial technology is one of the fastest growing sectors of the economy, with investments in the industry reaching $54.5 billion dollars in 2018 in the USA and $600 million dollars in Australia.
“Investment in Australian FinTech ramped up to record levels in 2018, both in terms of venture capital, but also in terms of Private Equity and M&A activity. We have rapidly built a thriving fintech ecosystem and investment plays a critical role. Open Banking is another catalyst for further fintech investment, in particular investment in overseas fintech companies which we are already starting to see,” said Ian Pollari from KPMG Australia Head of Banking and Global Co-lead for Fintech on the company’s February 2019 Press Release.
What Impact Does this Growth Have on Lenders?
For small business enterprises, financial technology lending companies sometimes becomes their only choice because their terms and regulations are not bound by brick, and they tend to offer a more flexible plan. Whilst for individuals, easy access and shorter turnaround time usually serves as their reason to go online and fill the easy-to-apply forms.
According to the lending experts at BMA Consulting, “with the improvement of Artificial Intelligence technology in recent years, digital transaction quickly becomes the ideal model for banking practice in the near future. Chatbots, virtual assistants, and customer care representatives created by financial technology companies for their software greatly improves the efficiency in financial’s sector end-to-end service.”
The reduction in bureaucracy and administration process also largely reduces human error, and with its absence, approval rate tends to increase. The change from manual to digital proceedings also gives the lender a double-tiered assurance of their consumer, because with every financial step also comes their digital footprint that can easily be checked and verified.
Following the digitalisation of financial affairs, open banking becomes the common practice countries start to implement. Open banking, a term derived from the practice of sharing consumer’s data between banks and other financial service parties, helps promote a positive competition environment within the financial industry and therefore, create more advantages for consumers in the long term.
Worries over data misuse would always be argued by those who have yet to adapt to the new practice. However, according to the financial experts at Bright Capital Finance “as long as there is trust in the open banking sharing mechanism, it should improve the overall picture.”
What Does the Future of Consumer Lending Hold?
According to the Accenture Global Financial Services Consumer Study in 2019, 56% of Australians would support banks to digitalise their services, and 56% of the respondents also stated that they are using their smartphones or internet-connected devices to check on their bank accounts.
The rise of financial technology companies would inevitably alter the role of banks in the current time, and banks would eventually adapt to the change by implementing the same technologies.
In addition, financial technology companies would later operate in a more secure and supervised environment as the government strives to promote assurance within the community.
Observations towards the rise of financial technology companies prove that a change in how a consumer practices their financial affairs is happening, whether governments are well-prepared for it or not. The existence of financial technology companies have enabled consumers to gain the best of both worlds by creating a more efficient system that promotes their best interests.
The time for consumers to be smart about practicing their financial affairs has come as technological breakthroughs in the financial industry occur, and it is imperative for consumers to find the balance that supports their ongoing and ever-changing needs.