Because of the disturbed trust relationship between savers and the financial sector, individuals now need and hope to control their financial resources. In other words, we want to be the ruler of our own capital and logically. Changes in consumer preferences have in-depth implications for the financial sector, because individuals will support a very special service provider that can ensure higher levels of transparency and decision power.
This industry experienced major changes in terms of “unbundling” (as defined by Fred Wilson in this video), moved from the old centralization. Now, only a few companies are entirely part of this movement. But they, in my view, disturbed the industry. More interesting, these companies are just a pioneer of movement – and that is why the Fintech sector is really “hot” at this time.
Now, let’s discuss this pioneer example that I mentioned, because they realize the movement of control and transparency in the current financial climate. I deliberately chose to focus on the Fintech Consumer-Driving solution, which has the biggest impact on the current banking sector.
1) Wealth / Investment Management
Investment management is the main activity for financial institutions. However, unless you are a top-tier customer with several million entrusted to the company, basically it is not possible to track or control how your money is managed. Especially after the massive shock of several institutions passed, savers were increasingly worried about their money and preferred to be more responsible for investment decisions.
It is probably one of the reasons why companies such as WealthFront in M., nutmeg in the UK and the stockpot in Aus gets a large market consensus. These companies do not only reduce barriers to enter (because you only register on their website), but also guarantee lower transaction & management costs (thanks to a more slimmer structure) and more real-time investment strategy transparency and control good). , Most importantly, they offer the benefits of this saver without requiring them to mobilize efforts in the decision-making process. In other words, the institutions reduce the hassle of making smart choices by turning and facilitating your decision, leaving you, the user, full of responsibility.
There are many individuals and small businesses that demand micro loans. On the one hand, financial institutions face excessively on market risk and default, and on the other hand, individuals want to maintain full control by the way their capital is allocated. Consider this, it is not surprising that the company such as (The Now Public) Club in the US or funding circle in the UK experienced exponential growth. This may seem like a market that does not overlap for banks, but it will actually begin to deal with traditional banking victims faster than later.
3) Online stock trading
In other words: Making investments in registered companies available for mass. This is controversial, but it is very disturbing and in line with the new saving of savers to become an arbitrator of their own money. Even though it takes the appearance of online games, the online investment platform is overcoming the same type of customer served by the bank and, just like to be loaned, it will further affect their business. The natural evolution of this movement will be the creation of online markets for private shares, displaying lower liquidity, lower regulatory requirements for companies and higher intrinsic risks. Some initiatives in the EU and the US seem to indicate this possibility is near.
4) personal savings and financial collections
How does the banking sector be made from the start? Simple: Collection of capital in return for the interest rate and the same capital allocation for a higher average interest rate.