Investment in financial technology, also known as fintech, has expanded in recent years as both individuals and businesses discover the many benefits from more convenient and intuitive solutions for routine transactions. In fact, Reuters reported that venture capital investments in fintech companies were 38% higher in the second quarter of 2017 than they were at the same time in 2016. That’s an increase of nearly $1.5 billion in one year. It’s an industry that continues to grow and look towards the future.
The Major Players
If you’re in the business sector, you’ve probably interacted with or utilized services from a number of fintech companies on the market. Stripe, which Forbes says was valued at $9.2 billion as of August 2017, created technology that allows companies to accept mobile and online payments. SoFi helps students finance their loans. As its name suggests, CreditKarma provides credit scores and features information about credit cards and loan companies.
Lastly, one you’ve almost certainly heard of Venmo. Although Venmo is still emerging relative to other fintech giants like PayPal, its usage as an intuitive peer-to-peer platform is changing the way consumers are participating in the online economy. But how? Let’s take a look at the aspects changing customer behavior.
The Three Driving Forces
There are three primary reasons behind Fintech companies reshaping consumer spending: faster and more convenient options, clearer information, and more options. Venmo has become so common that it’s become a generic trademark for small, peer-to-peer transactions that would have normally have been handled with cashless than five years ago. You don’t “use Venmo to give somebody money,” you just “Venmo them.” Venmo and other peer-to-peer money transfer systems make it incredibly simple and fast to move money. The faster people receive money, the faster they’re likely to use it on something else.
We’re currently living in what is considered to be the “Information Age.” Thanks to the internet, we have more information at our fingertips than ever before. Financial tech companies are tapping into this, as well. By breaking down complex ideas like mortgages, loans, and more into ways that are easier to understand, consumers can gain confidence in their spending decisions, enabling them to invest wisely and with greater frequency.
Finally, Fintech companies help drive consumer spending by simply providing more options. People no longer have to choose between one or two companies to invest their money with because there are new mobile investing companies popping up every day. Having more options also incentivizes established companies to improve their standards and practices in order to attract new customers.
Continuing to Grow
As with any other market, the financial tech industry has its ups and downs. However, the upward trend looks very positive and it’s exciting to see what new technologies and solutions will emerge from it. One thing’s for sure: any company that wants to be both financial and technological can really benefit from hiring a team experienced with providing IT for finance companies to help manage their products. You’ll need experts from both fields to get the best results, and I for one can’t wait to see what those results are.
Stephanie Rowan is an electronics and technology expert. She writes about emerging trends, new technology, and anything that interests her.
How Financial Technology is Driving Consumer Spending