The chang­ing world of fin­tech

Naomi Gas­ton on how in­no­va­tion will keep chal­leng­ing the way we man­age our money

Belfast Telegraph - Business Telegraph - - Front Page - By Naomi Gas­ton, Bank­ing and fi­nance As­so­ciate, Car­son Mcdow­ell solic­i­tors Naomi Gas­ton is an as­so­ciate at Car­son Mcdow­ell spe­cial­is­ing in bank­ing and fi­nance and Gen­eral Data Pro­tec­tion Reg­u­la­tions (GDPR)

If I asked you to name a sec­tor which in­spires change, mo­ti­vates oth­ers and chal­lenges the norm, I imag­ine that ‘in­sur­ance’ wouldn’t be on the tip of your tongue. How­ever, the in­sur­ance sec­tor has grabbed hold of fin­tech in­no­va­tion, on many oc­ca­sions well ahead of con­sumer de­mand, and led the way for oth­ers who are now play­ing a game of catch up.

The way we buy in­sur­ance matches the needs of the mod­ern con­sumer. We want to pricecheck, we want the process to be clear, fast and ef­fi­cient, and, most im­por­tantly, we want to be able to pur­chase on­line at a time that suits us. Providers like Money Su­per­mar­ket and Go­com­pare, for ex­am­ple, have been ahead in de­liv­er­ing our home, hol­i­day and car in­sur­ance in the slick­est for­mat pos­si­ble. And providers like Trov are break­ing it down even fur­ther to of­fer in­sur­ance on de­mand.

As a re­sult, the in­sur­ance sec­tor has ac­tu­ally made peo­ple de­mand more from other fi­nan­cial in­sti­tu­tions.

Dig­i­tal so­lu­tions are gain­ing in pop­u­lar­ity and it seems al­most ev­ery week a dif­fer­ent fin­tech de­vel­oper is an­nounc­ing a new ‘in­no­va­tive’ prod­uct for the fi­nance in­dus­try. How­ever, adop­tion of fin­tech hasn’t kept pace with in­no­va­tion. When prop­erly ap­plied fin­tech can en­hance con­sumer sat­is­fac­tion — which is the holy grail of the ser­vice in­dus­try. Early adop­tion is also seen as a marker of for­ward-look­ing, adapt­able busi­nesses.

But in com­par­i­son to in­sur­ance, bank­ing has been slow to change and still re­lies heav­ily on non-dig­i­tal meth­ods of man­ag­ing cash and ac­count in­for­ma­tion. Typ­i­cally, the sec­tor is risk averse. It is very heav­ily reg­u­lated and many bank­ing sys­tems sim­ply aren’t com­pat­i­ble with mod­ern in­no­va­tion.

To avoid a large in­vest­ment and begin­ning again from scratch, many in­sti­tu­tions are at­tempt­ing to ‘ bolt on’ var­i­ous ser­vices to their cur­rent of­fer­ing, with­out much suc­cess. Oth­ers are tak­ing the step of pur­chas­ing fin­tech com­pa­nies in an at­tempt to keep up with the pace of chang­ing tech­nol­ogy. More dig­i­tal friendly lo­cal banks tend to have par­ent com­pa­nies which have been early adopters of tech­nol­ogy.

All of this could be about to change with the ad­vent of ‘open bank­ing’ next year, but the onus is on banks to grab hold of this op­por­tu­nity if they don’t want to be re­placed by new dig­i­tal-only providers.

If we are hon­est, dig­i­tal dis­rup­tion of the bank­ing in­dus­try can be de­scribed as piece­meal rather than who­lescale.

In the event when an on­line bank­ing sys­tem crashes, the im­pact on con­sumers is much greater than that of the in­sur­ance sec­tor, how­ever, for the most part, the ben­e­fits far out­weigh the neg­a­tives. Be­ing able to trans­fer your money, pay bills and keep track of ex­penses on­line or us­ing an app is now ex­pected of most banks.

In Amer­ica, there have been big steps for­ward in how mort­gage and auto lend­ing is man­aged, with a much quicker tran­si­tion from face to face meet­ings to dig­i­tal lend­ing.

While this is seen as riskier, it is also some­thing that con­sumers are com­ing to ex­pect and de­mand.

Mil­len­ni­als are a tech savvy gen­er­a­tion and at the mo­ment banks aren’t cater­ing to them as well as they should. These cus­tomers tend not to be cash rich, how­ever this is also the gen­er­a­tion that will stand to in­herit wealth from their par­ents in the fu­ture.

When this hap­pens, mil­len­ni­als will want to be able to move their cash eas­ily and quickly. Clunky sys­tems, such as the ma­jor­ity of those avail­able at the mo­ment, may only al­low for £10,000 a day to be trans­ferred.

Paypal and other al­ter­na­tive pay­ment so­lu­tions have recog­nised the im­por­tance of be­ing able to do what you want with your own money when you want to. In­ter­na­tional bank­ing trans­fers, for ex­am­ple, on this plat­form can be made sim­ply and eas­ily, whereas banks tend to make this a far more la­bo­ri­ous process.

Fin­tech will con­tinue to threaten and chal­lenge tra­di­tional bank­ing ser­vices with the prom­ise that in the fu­ture we will have much more con­trol over how we view, move and man­age our own money.

The bank­ing in­dus­try has faced dra­matic changes in how peo­ple man­age money

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