Financial Technology, Version 2.0: Creating Havoc in the Financial Sector

It is a well-known fact that the majority of people have difficulty comprehending banking and its mechanisms, something which has been supported by history. However, the fortunate part is that the complicated nature of banking and its secretive nature are actually providing a push for innovation to take place in the opposite direction.

When the investment bank Lehman Brothers declared bankruptcy in September 2008, the news media was rife with grim-faced financial analysts and commentators. Economists warned that if decisive action was not taken promptly, the consequences would be dire. This was, after all, the most severe economic crisis since the Great Depression, which saw global stock markets plummet and a widespread lack of trust in the financial system.

Despite providing multiple avenues of explanation regarding the financial crisis, including issuing warnings, providing news coverage, releasing films such as ‘The Big Short’ and producing detailed essays, the majority of people still had difficulty understanding the situation. Most people were only aware of the immediate and tangible effects, such as financial losses, foreclosures, evictions and unemployment.

The circumstances we found ourselves in not only caused us to endure a extended period of economic hardship, but it also provoked a collective realisation. Very few of us had bank accounts, despite being reliant on them for everyday financial activities such as payments, money transfers and deposits. We had no comprehension of how they operated or why they behaved in a certain manner. The complicated and impenetrable nature of the financial system has not helped to improve our understanding.

The purpose of this overview may be ambiguous. As a result, Fintech 2.0 has been established as a new wave of financial technology, which seeks to go beyond simply optimising existing procedures. In fact, its primary purpose is to bring about a financial revolution which will completely transform the banking sector and ensure that a financial crisis equal to that of 2008 can never transpire again.

Just What Is Financial Technology?

It is true that the term ‘Fintech’ is commonly used to describe the use of technology in the financial sector. However, for the purpose of clarity, it is important to acknowledge the various elements of this technology and the ways in which it is being utilised by banks and other financial organisations. As such, it is necessary to provide a comprehensive definition of Fintech, which takes into account all the various components and applications of technology being used within the financial sector.

At the start of the 21st century, the phrase ‘back-end systems’ began to be used to refer to the infrastructure supporting traditional financial institutions such as banks and investment firms. Financial Technology (Fintech) has since been dedicated to two primary aims: making financial services more accessible, and making their delivery more automated. To accomplish these objectives, specialist software is utilised to streamline and simplify existing processes.

Despite the fact that Fintech had already provided a great deal of benefit, there was still more that could be done. The public’s lack of trust in traditional banking institutions during the Great Recession was concurrent with the rise of the app economy. People had become so accustomed to using apps for virtually everything else, so it made perfect sense for them to use banking applications too. This consequently led to the emergence of a second wave of financial technologies.

The banking and investment industry is undergoing a remarkable transformation, with an abundance of new companies revolutionising the way we manage our money. Thanks to the advent of modern applications, it’s now easier than ever before to take full control of our finances. Perhaps the most remarkable aspect of this development is that the customer is now at the heart of the process, with the various innovative businesses putting the user experience front and centre. To discover more about this exciting evolution, read on to gain an insight into how these dynamic organisations are transforming the financial landscape.

Facilitating Agency Amongst Clients

It is clear that the younger generations, such as millennials and Gen Z, are largely responsible for the proliferation of digital media and mobile applications in today’s society. These generations have demonstrated a growing level of skepticism towards conventional financial institutions, leading to a preference for alternative payment and money management methods. This shift in attitude has meant that an increasing number of businesses are now taking advantage of the capital markets in order to finance their own enterprises.

Various businesses are sparking consumer curiosity in alternative methods of money management in a range of ways. Taking Klarna as an example, this novel payment service is aiming to revolutionise the way we shop online. It is achieving this by partnering with different stores, each of which is offering their own tailored payment plan: 30 days after delivery, 36 monthly instalments, or no payment at all.

Laybuy offers customers the opportunity to spread the cost of purchases across multiple payments. Whether the customer is making an in-store or online purchase, they are able to make their first payment at a time that is convenient for them and can then schedule the remaining payments for a later date. This is beneficial for retailers as well, as they are able to avoid having to make price cuts in order to increase sales, and can instead continue to receive full retail prices for their goods. In exchange for this service, retailers may be required to pay a fee.

Fintech 2.0 businesses are playing a significant role in transforming the investment sector. Investment opportunities, which were historically only accessible to specialist brokers who would often confuse customers with complex technical language, are now available to all with just a few clicks.

Wealthify is one of the most outstanding providers of investing services. Its main focus is to make investing accessible for individuals from all backgrounds, regardless of their experience or available funds. You can open an account and select an investment strategy without the need for an initial deposit, with options ranging from cautious to adventurous. Once you have chosen a strategy, you can easily view an estimation of the potential returns based on your personal profile.

Artivest is an innovative platform which provides investors with access to private equity and hedge funds. Subscribers can easily acquire the necessary materials online and begin the process of investing in a matter of minutes. Furthermore, users are provided with the support of Artivest’s in-house advisors and can easily monitor their progress from their mobile device.

The home-buying process is one area where modern FinTech (Financial Technology) is having a major impact. Morty, a digital mortgage broker, is a prime example of this, providing buyers with assistance throughout the entire transaction. Through Morty, buyers can access their credit score, loans and mortgages, all with the help of specialist online advisors available on-demand.

EToro, a multi-asset platform for cryptocurrencies, equities, indices, and commodities, is advocating for an even more innovative alternative for novice investors. This platform provides guidance to those who are starting to explore the financial markets by allowing them to replicate the portfolios of successful traders. Furthermore, its acceptance of Bitcoin is a step towards making cryptocurrency more accessible and popular, particularly among younger users.

Ultimately, the use cases highlighted demonstrate that Fintech 2.0 is primarily focused on providing consumers with more control. There are a range of options available for achieving this on a financial level, but the key aim is to modernise outdated processes, simplify communication and reduce the entry barriers.

The Future of Finance Will Be Completely Different

The majority of fintech 2.0 organisations are relatively small at present, but this is likely to change in the near future. This growth in popularity is anticipated as millennials and Gen Zers move away from traditional banking institutions that were involved in the 2008 financial crisis. Not only do fintech organisations bring a fresh approach to the banking sector, but they are also new and offer a unique cultural perspective.

This updated strategy puts consumers at the forefront, reflecting the current emphasis on creating a positive user experience. Additionally, these digital channels are providing access to those who previously felt excluded from the financial system, enabling everyday people to take part in an area previously dominated by Wall Street’s “wolves.

In light of the current climate, it is evident that Fintech 2.0 represents a significant shift in the landscape of financial services. Start-up companies are transforming the way payments, investments, loans and other areas of finance are managed, as a result of the public’s lack of trust in traditional financial institutions and the lessons learned from prior economic crises. It is clear that the primary objectives of this revolution are to give individuals greater control of their finances, as well as to avoid a repeat of the Great Recession.

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