Technology has come to affect almost every aspect of our lives. It is no surprise that technology would begin to change the financial sector. Two of the most profitable industries in the modern economy are converging, and banks can either embrace this change or resist it. If banks choose to resist it, they will likely end up on the losing end of what is now being called Fintech.
Prepaid credit has been a component of the financial industry for a while now, but with tech changing finance more and more, prepaid credit cards are becoming increasingly enticing for consumers. With technology affecting efficiency and reducing the need for labour, Fintech start-ups have been popping up everywhere, but what does this mean for financial industry in specific and for the economy at large?
What is Fintech?
Loosely defined, Fintech is a technological service that seeks to improve and automate financial services. It is typically utilized to help stakeholders, which includes companies, their owners, and their consumers to better manage their financial operations. The goal is to facilitate the process and lives of these people by using software and intelligent algorithms. Digital transactions, whether they’re online shopping, foreign currency exchanges, stock investments, and money transfer are possible and easily accessible with Fintech.
Types of Fintech
With Fintech, you don’t need to go to banks or credit unions to borrow money. Companies in this sector will make loans directly to consumers. You can also send money to people without talking to the bank. Fintech companies are offering international money transfer at lower costs. Consumers can also get personal finance advice anywhere, there are even apps that help budget and savings plans. These businesses are usually focused on distributing insurances, reaching out to underserved consumers.
Fintech firms are making it easier for businesses to raise money by simplifying the process or providing alternative forms of funding. According to the site MoneyPug, which is a site used to compare prepaid cards, the industry has been reaching out to unbanked consumers who are unable to get approved for credit cards, many of these companies are offering prepaid cards. This has been well-received by consumers, but banks aren’t too happy about it.
Fintech vs. Banks?
Since there has been a rapid penetration of Fintech companies in the marketplace, banks may be facing problems engaging with consumers and competing with the services that Fintech businesses provide. Those who see Fintech as potential collaborators, however, are benefiting much more than those who see the emerging industry as the enemy. It is generally a consensus that if banks push out Fintech, it would be less profitable for the industry than working with the new industry.
Prepaid Cards
Fintech companies have been able to offer prepaid cards with no activation fee, credit check, or monthly maintenance charges and that’s why they have become popular with consumers. For one they’ve enabled employers to load payroll directly to employee’s cards simply by taking a photo of the paycheck. Furthermore, cardholders can use the service to send money locally and internationally. These companies are catering to underbanked people in the US with the tagline of helping them better their finances. Banks cannot offer all of these benefits, but it is wise of them to work with Fintech firms.
While banks have long been the financial institution that people go to for loans, prepaid credit is changing that. It is wise of banks to work the companies in this new Fintech industry, otherwise they may lose out in the end. It only makes sense that consumers will gravitate towards the lending option that enables them to save better and, hopefully, emerge from debt.
Time will tell whether these Fintech options will actually help consumers become financially stable or if they will become yet another scheme to take advantage of the less fortunate. Either way, one thing is for sure. Fintech companies are taking business from banking and financial institutions are trying to properly respond to the competition. Embracing technology in finance will only lead to making more money, offering better services, and encouraging more consumers to spread the word about these new financial options.