In simple words, FinTech is “Power to the People!”
Take money transfers as an example. By allowing transparency and cutting middlemen fees, FinTech start-ups enable individuals to have control over their own money. End-users know how much they pay, and incidentally, this is less than what they used to pay. This innovation is actually having a really big social impact, as there are start-ups
specializing in a certain kind of money transfers: remittances (money sent by foreign workers to their home country).
WorldRemit and Remitly are attracting serious attention, having respectively raised $100 million and $12.5 million in funding.
This is not surprising, as they are entering a market worth more than $600 billion a year.
Another way of empowering people is to provide them with money. The financial crisis not only resulted in a lack of trust towards banks – it also made it more difficult for people to take out loans. Peer-to-peer lending has broadened the availability of financing, enabling people and businesses to borrow money more easily, faster, and in a more transparent way. These FinTech startups have applied disintermediation to credit, connecting buyers and
sellers through marketplaces. At the forefront of this trend stands Lending Club which raised almost $900 million in one of the largest IPOs of 2014.
FinTech is also widening access to investment opportunities, through crowdfunding. Let us not forget that equity investment was once restricted to wealthy individuals. It is now accessible to all! If you have a small amount to invest, you can still have an impact and potentially reap some benefits. Kickstarter, Indiegogo, Crowdcube, just scroll down and choose your project.
We already seem to be accustomed to this sector of FinTech, and tend to forget how revolutionary it is. Robo advisors are also shaking up the investment world, extending financial advice to just everybody. According to a report by consulting firm A.T. Kearney, these automated investment services will manage about $2 trillion in the US by 2020, accounting for 5.6% of Americans’ investment assets.
Generally – and I think this is the biggest revolution – FinTech is providing access to information, that once belonged to a select few, to an ever-increasing pool of people. In our “information economy” age, that is a big democratic move.
References
- For additional insights on the social impact of FinTech, see Part 5. For further information on crowdfunding and the impact of FinTech on other sectors, see Part 8. See Part 10 for more information of FinTech influencing investment and capital trends. See http://money.cnn.com/2015/06/18/investing/robo-advisormillennials-wealthfront
- For further information on crowdfunding and the impact of FinTech on other sectors, see Part 6.
- See Part 6 for more information of FinTech influencing investment and capital trends.
- See http://money.cnn.com/2015/06/18/investing/robo-advisormillennials- wealthfront
- For further information of the applicability of FinTech solutions to emerging markets and their social impact, see Part 5 Currency Cloud, “The Insider’s View to Payments and Fintech”, 2015,
https://www.currencycloud.com/payments-innovation-2015 - Currency Cloud, “The Insider’s View to Payments and Fintech”,2015,
https://www.currencycloud.com/payments-innovation-2015.
