The Financial Revolution: How Emerging Technologies are Changing the Way We Manage Our Money

The rapid evolution of technology has been transforming industries for decades and the financial services sector is no exception. In the past, banks needed physical assets like branches in order to scale but thanks to technological advancements, many modern businesses can push past big historical obstacles and manage complicated operations digitally.?

This shift is steered by growing FinTech startups and SMEs that are redefining the way we manage our finances, with products and services that address specific client needs. For instance, imagine if you could receive your paycheck days in advance or could overdraft without getting hit with a fee. For millions of people, this is already a reality thanks to Neo-banks. These digital-only banks that operate without a physical branch network, are rapidly gaining popularity, especially among retail customers and SMEs. In fact, the global Neo-banking market is projected to grow at an astounding rate of 54.8% from 2023 to 2030, signalling a major shift in the way we manage our finances.?

In essence, Neobanks and other FinTech solutions, such as open banking and DigiWallets streamline and simplify online banking by offering apps and associated technologies. They also provide customers with key features, such as free debit cards, digitised account opening, personal finance advisory, among many others.?

One of the most popular Neo-banks in the United States, Chime, for instance, claims to have more than 14 million customers and was founded with the aim to help make ‘managing money easy.’ Now if you are an average American who works 9 to 5 and gets paid every two weeks, Chime’s features can be particularly attractive. These include no monthly fee, no minimum balance, and the ability to overdraw on debit card purchases up to $200, making Chime more appealing than traditional financial services.

Neobanks are also creating a better narrative than traditional banks by using unconventional and customer friendly approaches to gauge the likelihood of a customer repaying a loan. Traditional banks rely solely on an individual's credit history, while Neobanks determine credit worthiness by understanding someone's financial health. This approach involves an ‘enrollment analysis’, which entails a holistic understanding of online data such as a consumer’s receipt, and monthly spending habits to determine the type of loan they can qualify for. Now this is a particularly helpful practice for almost 22% of the US adult population. Here I am talking about the un-banked and the under-banked Americans, who have minimal or no access to financial services that are mainstream.?

In addition to Neobanking, open banking is another trend that is revolutionising the financial sector. Open banking allows startups and SMEs to offer more individualised services to customers by creating cutting-edge products that respond to specific customer needs. They do this by leveraging open APIs to access financial data. For instance, the UK-based startup Monzo used open banking APIs to create a mobile application that connects with other financial services and enables users to handle all of their financial affairs in one place. This offers a user-friendly experience while offering insightful data on client behaviour and preferences.?

What's equally interesting is that these FinTech solutions are growing rapidly worldwide. For instance, the use of digital wallets is expected to rise across APAC, Europe, LATAM, MEA, and North America at a double-digit CAGR. This is mainly due to the speed and simplicity offered by these solutions.?

In fact, in the coming years, digital wallets are expected to account for an increasing share of global e-commerce transaction value. Digital wallets were responsible for almost half (49%) of global e-commerce transaction value, surpassing credit cards (21%) by a significant margin in 2021. However, it is projected that digital wallets will increase their market share to 53% by 2025.

Apart from the simplicity & speed, the rise in demand is also due to the flexibility associated with digital wallets. For instance, up until a few years ago, most digital wallets included the credit and debit cards of their users, but now customers are funding their digital wallets using their bank accounts.

Overall, FinTech startups have done well by specialising in offering one type of financial service and focusing on providing excellent customer service, branding, and competitive pricing. By developing innovative products and services that address specific client needs and leveraging the power of open banking, digital wallets, and other technologies, these companies are able to provide more personalised and user-friendly experiences to customers, driving competition and innovation in the industry.?

In conclusion, these three trends are just a few examples of how FinTech startups and SMEs are disrupting the financial services sector. And as we look to the future, it's exciting to think about other disruptive technologies that will redefine the industry and provide even more innovative solutions for customers.?