Advanced technology is continuously working its way into our portfolios and mobile wallets. With plenty of mobile banking services, investing and budgeting apps, you are likely conversant with at least one financial tool. Indeed, the financial technology industry is growing at a healthy rate, with 31 billion invested in the space in 2017, according to a recent report from KPMG.
In many ways, automating and digitizing money is a positive movement in that it assists individuals to improve their day to day financial undertakings. “Financial technology involves making the banking system work seamlessly for you and helping consumers to live a smoother life,” said Jason Raznick, founder of Benzinga, a financial news outlet that hosts a global fintech award to recognize innovation in the industry.
Financial technology helps to make investing more accessible to people of different social status. Contrary to the common belief that one needs a fortune to invest, some apps such as Acorns, Stash, and Robinhood allow you to start with as little as $5. With Acorns, for example, all you need to do is link your account with your bank account.
Each time you swipe your card, the app rounds up the transaction and moves your change into a brokerage account, which is invested in select exchange-traded funds. “With Acorns, we did not convince anyone that they should invest or save because often, everyone knows they should, and it includes personal decision making,” says Jeff Cruttenden, co-founder of Acorns. He added that his app lightens the process and creates an avenue for people to marry their investing decisions with their day to day lives.
Problem-solving and empowering
“There are many areas where financial technology can help to give information and solutions to personal financial problems,” confirmed Annamaria Lusardi, founder of GFLEC. Fintech can also be empowering, especially for women, because it helps to level the playground. “A great deal of research shows that women find the traditional investment setting unwelcoming,” claims Sallie Krawcheck, founder of Ellevest.
On the other hand, working with a robot-adviser or any other technology-based tool is more approachable and provides a platform for easier penetration into the space. Krawcheck says that financial technology helps individuals who might feel intimidated because they can now explore the investment industry in their own time and convenience. Additionally, fintech apps are more cost-effective than traditional banks and brokerage houses, a particularly attractive feature for newer and greener investors.
Technology has greatly altered many aspects of our lives, and it is not surprising that it is responsible for how today’s money is created, managed, shared, spent and created. Continued innovation means that new financial technology players don’t have to match giant corporations in both size and services. They can come up with unique and targeted services at lower rates, a twist that is helping to transform the industry to incorporate low scale investors. When selecting an ideal company to work with or an app to use, be cautious and ensure to confirm their legitimacy. Raznick recommends using referrals from friends and testing out with a small investment before indulging fully.