The line between traditional finance and technology continues to blur as more “fintech” companies emerge. Both businesses and consumers are becoming more accustomed to using some form of electronic payment instead of paying with a debit card or by check. Meanwhile, the pace of technological innovations and a relaxation of financial regulations in some areas are allowing changes to how people interact with their money and the businesses they transact with.
Here we look at how technology is intersecting with traditional finance in today’s economy.
In a surprisingly short amount of time, Apple’s nascent point-of-sale e-pay system has been growing in usage across the states. Big name retailers, restaurant chains, and even small mom ‘n’ pop stores have found that accepting Apply Pay is worth the trouble.
The system is both a digital wallet and a payment method using an Apple mobile device like an iPhone, iPad or Apple Watch. The payment is made without a need to touch a payment terminal directly.
For people looking to buy a home, thankfully it’s still possible to arrange a conventional mortgage with a reputable bank. After all, one doesn’t want to trust such a large value transaction to a small fintech startup with limited venture-capital backing.
While variable rate mortgages are possible, it’s best to stick to a conventional-type lending arrangement where the loan is set at a fixed rate. It’s worth noting that because interest rates are close to an all-time low presently, any future rise in rates would increase mortgage payments on a variable rate loan. Borrow smartly.
Another example of a newer fintech startup that’s gradually spreading its service around the world is TransferWise. Launching in London, England first, it’s now available in the USA, Canada, and select countries around the world. The idea behind the app and service is to enable people to transfer money internationally and between currencies, while minimizing the traditional wire transfer bank fees. Their rates compare favorably to domestic bank fees when sending money abroad from one bank account to another one.
The so-called Robo Advisor model is a fairly new one in investing circles. Betterment has emerged as one of the leaders in the space, providing online access to ETF-based investment portfolios that ostensibly run without direct financial advisor oversight. The company started 2017 with over 200,000 clients and more than $7bn under management. People have been taking notice.
One can think of Betterment as a combination of a low fee investment (similar to Vanguard but not quite at their level yet) and lifestyle ETF portfolio where investors index the markets (or sectors of it). Fees are half a percent or less per year. There’s also no minimum investment, so the little person can get involved too. Nice.
As we’ve explained, with the rapid pace of technology, it’s likely that the landscape will continue to shift in the technology/finance space. Some venture capital funds focus exclusively on fintech startups, so clearly, it’s seen as a high growth area to create some disrupter-like startups that provide services previously only offered by banking institutions.