History has proved that most of us don’t get banks. Luckily, their incredibly complicated and somewhat obscure inner workings are pushing technology to do the opposite.
When investment bank Lehman Brothers collapsed in September 2008, the news filled with financial experts and columnists with severe looks on their faces. Economists warned us that we had to be prepared for dire consequences. After all, this was the biggest financial crisis since the Great Depression. It all ended up leading us to the Great Recession, a drop in stock markets around the world, and the loss of trust in the whole banking system.
Yet, for all the warnings and news stories, movies like The Big Short trying to make it all accessible, and the long, oh-so-long articles providing deep insights into the subject, the general public still struggled to understand the whole ordeal. The only thing most people really understood was the effects that hit them right afterward – the loss of wealth, the foreclosures and evictions, the mass unemployment.
Such a context didn’t just drive us into a delicate economic scenario for years but also made us collectively realize something else. Most of us didn’t get banks. Though we used them for payments, wire transfers, and deposits, their inner workings and their roles in the bigger picture eluded us – and still does. It doesn’t help, either, that the banking system is incredibly complicated and somewhat obscure.
You might be wondering why all this recap. Well, because all of it propelled the rise of Fintech 2.0, the second wave of financial technology that wants to go beyond improving the efficiency of current processes. In fact, it wants to bring a financial revolution that changes banking as we know it and prevents a 2008-like crisis from ever happening again.
What’s Fintech, Anyway?
Fintech is nothing more and nothing less than a portmanteau formed by finances and technology. So, it might seem enough to say that any technology the banking and financial institutions are using falls under this category. However, it’s best if we clarify a couple of things.
First, fintech is all about improving and automating the use and delivery of financial services. When it first emerged at the beginning of the 21st century, the term applied to all the back-end systems used on established financial institutions, mainly banks and investment companies. Their goal? To improve operations and streamline processes using specialized software.
But Fintech would go on to offer us much more. The public distrust of the banking industry after the Great Recession coincided with the birth of the app culture. Since we all started to use apps for everything and anything, why would we not bank from there as well? That’s the precise moment when Fintech 2.0 started to appear.
Now, a lot of startups are constantly reshaping what banking and investing look like. You can do pretty much anything you want with your money just by using an app. The best part of it? That all is simple, transparent, and more consumer-centric than it ever was. Here’s how these companies are shaking up the financial world.
Most of the drive behind the adoption of online platforms and apps comes (obviously) from the support of millennials and Gen Zers. There’s more skepticism about the traditional financial channels, so younger generations are adopting new ways of paying and managing their money. And that shift is making more and more startups take their shots in the financial world.
There are a lot of ways in which those companies are making customers interested in handling their money in a new way. Take Klarna, for example. This new payment provider is looking to revolutionize how we shop online. By partnering with different retailers, it offers different payment options that allow any online shopper to pay for products up to 30 days after receiving them or in up to 36 monthly payments.
Laybuy is another payment platform that lets customers pay for their purchases in up to 6 installments. It doesn’t matter if they are shopping online or in-person – the company lets them pay for the first installment and choose when they’ll be paying the rest of the installments, all for free. Retailers pay a commission but, in return, they can cut off discounts and sell more products at full price.
Investments are another field that the fintech 2.0 startups are disrupting in a big manner. Once the dominion of brokers that gatekept transactions and hid behind jargon-inflected services, investments are now at the tip of our fingers.
Wealthify is one of the best examples out there. By lowering the entrance barriers, it aims to open the investment for anyone, even those without much capital to invest and without much knowledge about it. With no minimum entry fee, you can set up an account and define its investment style (cautious, tentative, confident, ambitious, and adventurous). After that, you can check the projected values of potential investments depending on your profile.
And what about Artivest? This innovative platform aims to connect investors with opportunities by providing access to private equity and hedge funds. You can get to online subscription documents in a matter of minutes and online. After investing, you can monitor everything from your smartphone and get access to advisors from within the platform.
The fintech 2.0 revolution is also bringing change to how you buy a house. Proof of that is Morty, an online mortgage broker that walks you throughout all the steps of the purchase. Through it, you can calculate your financing score, secure a loan, and get a mortgage, all guided by experts that are online on-demand.
Even more cutting edge is the solution pushed by eToro, a multi-asset platform for cryptocurrencies, stocks, indices, and commodities. Its aim is to help first-time investors in taking their first steps into the investing world. To do that, it gives them the possibility of copying the portfolio of successful traders. The best thing about the platform, especially for younger users, is that it accepts Bitcoin as a currency in an effort to get crypto money out of the ghetto.
As all of these examples show, Fintech 2.0 has one goal in mind – empowering customers. There are a lot of ways of doing that when it comes to finances. However, they mostly try to streamline stale processes, dejargonize the communications, and make it easier for everyone to get on board by lowering the entry barriers.
The Finance World is About to Change Forever
Most of the companies devoted to fintech 2.0 aren’t precisely huge today. But that’s about to change. As younger generations get away from the traditional entities that played a pivotal role in the 2008 banking crisis, all of these startups will become more and more popular. Not only because they are new and have different culture but also because they offer a different way of approaching finances.
This new focus puts the customers in the center, an approach that is more in line with the current vibe of the user experience era. Besides, these platforms and apps are opening the doors for people that felt like outsiders in the money world. There are common people walking into what once was the reign of the wolves-of-Wall-Street types.
Under that light, fintech 2.0 is a revolution in every sense of the word. Informed by the recent financial disasters and with the public distrust for traditional financial institutions in mind, startups are shaking up payments, investments, loans, and beyond. The goal is clear – to put people in charge of their own money and to avoid another Great Recession at all costs.