You’ve probably seen an increase in the number of advertisements for credit cards and debit cards during the last several years. The vast majority of these brand-new credit cards are, in fact, illustrations of products that are instances of what is known as “fintech,” which simply means that they are more technologically sophisticated than conventional banking organizations.
The card issuers develop relationships with banks that operate in the shadows in order to give underserved consumers access to extra features and expanded banking possibilities; it also allows banking for ecommerce made easy. Nonetheless, the question remains as to whether or not these cards really live up to the claims that are made about them.
The phrase “financial technology” is sometimes shortened to “fintech”. The word “virtual currency” refers, in its most fundamental sense, to businesses that provide monetary services via the use of computer programs or other types of electronic communication. To put it another way, the financial technology industry is all about the dynamic intersection of technology and economic services, and this intersection is continuously moving.
Have your documents been uploaded to a cloud storage service? You have participated in the use of financial technology. When was the last time you made a transaction using PayPal? You have participated in the use of financial technology. Have you ever put a program onto your phone that was downloaded from the internet? It’s likely that you’ve already taken use of some kind of financial technology.
Using specialized algorithms and software, the overarching goal of fintech is to assist individuals in better managing their personal finances while also assisting corporations in better managing their financial operations. Despite the fact that fintech is often linked with cutting-edge start-ups and new growth enterprises, the bigger ecosystem comprises a wide variety of stakeholders, including existing financial institutions and massive IT corporations. The financial services sector is benefiting greatly from the transformation that is being brought about by fintech.
Some Examples of FinTech
In light of everything you’ve learned thus far, here are some examples of how fintech might be used:
To begin, let’s consider the concept of trading. To buy shares, investors may use one of a wide variety of stock trading applications that can be downloaded onto their smartphones or tablets. In addition, a multitude of automated investment advisers, or robo-advisors, have recently entered the market. These robo-advisors provide investors with asset recommendations and algorithm-based portfolio management.
Also known as regtech, this area of fintech company concentration focuses on the use of technology to enhance compliance and expedite regulatory procedures. Regtech is especially useful for anti-money laundering legislation and knowing your customer requirements, both of which are aimed at preventing fraud.
Blockchain Technology and Digital Currencies
Blockchain technology, which offers a safer and more reliable method for keeping track of financial transactions, is one of the most prominent instances of fintech. The influence of blockchain technology and cryptocurrencies on the financial services sector is continuously morphing, as seen by developments such as blockchain-powered invoicing, distributed ledgers, and immutable records.
It is also very important to consider the influence that fintech is having on lending solutions, often known as lendtech. When technology is included into the process of lending money, it may make it simpler to estimate future income, determine the value of collateral, and investigate the credit histories of potential borrowers.
Another industry that fintech has had an impact on is the insurance industry. In a nutshell, the goal of insurtech is to increase productivity in the insurance industry by the use of various technological solutions. This might be achieved via the use of a broad range of technologies, such as the Internet of Things and machine learning (IoT).
In addition to these instances of fintech, there are a number of other areas of the financial sector that are undergoing a revolution thanks to businesses in the fintech industry. These areas include cloud accounting, crowdfunding, encryption, smart contracts, and a variety of other areas.
Just What Are These Mysterious “Fintech Cards,” Exactly?
The merging of traditional financial services like loans, investment portfolios, and insurance with cutting-edge technical advancements is what is referred to as finance-related technology, or Fintech for short. When discussing payment cards like credit cards or debit cards, the phrase “fintech card” refers, in general, to any new card that is not issued by a traditional financial institution. This may apply to both credit cards and debit cards.
The Utilization of Financial Technology Cards
It is vital to bear in mind that such aforementioned financial technology companies are not banks in themselves. Instead, in order to perform the function of an intermediary, they establish working relationships with banks. Thus, if you make a purchase using a credit card that was provided by Fintech Company A, the money that you spend really comes from a bank that is situated somewhere else and is protected by the FDIC.
Debit cards associated with cash management accounts work in the same way as any other kind of debit card. As soon as it reaches a deposit, the financial technology company B will move your money to a new bank account. When you make purchases using a debit card that was issued by a finance technology business, the money for the transaction comes out of an account which is insured by the Federal Deposit Insurance Corporation (FDIC). The company that specializes in financial technology generally operates as an information gateway.
In this sense, fintech cards are just a fancier technique of paying for products using a conventional bank account in another place.
Examples of New Financial Technology Cards
The following are some instances of financial technology cards that you may have come across:
Aspiration: A bank card that provides up to 10% cash and grows a tree for every transaction round-up in your savings account.
An installment loan and a credit card are combined into a single financial instrument known as an “Upgrade Card.”
Cred.ai is a credit card that promises to never charge you fees or interest and is presently in beta testing.
The financial management account from Chime Bank comes with a low monthly charge and additional benefits, such as receiving your salary two days earlier and being exempt from overdraft penalties up to $200.2.
People without credit histories may apply for a Jasper Card, which is a cash-back credit card.
Why Companies in the Technology Sector Are Entering the Payments Industry
It is general knowledge that the traditional banking system does not adequately meet the requirements of a significant percentage of clients in a satisfactory manner.
There are around 7.1 million people living in the United States who do not have bank accounts, and approximately one in ten have no credit score at all. Customers of financial institutions who have bank accounts are the source of about $17 billion worth of yearly income generated by fees associated with overdrafts and non-sufficient funds.
Fintech companies may be able to add value to the payment process by acting as an intermediary between you and the source of your cash. As long as they stay within the confines of the rules that have been set up to regulate them, the number of items that they are allowed to provide is almost unbounded.
The Possible Influence That the Current Wave of FinTech Will Have On Your Upcoming Payment Card
Fintech cards provide a variety of perks, the bulk of which are not accessible with standard credit and debit cards. These benefits include the following.
Different, more forward-thinking methods for evaluating creditworthiness If a company just used a person’s credit score when deciding whether or not to issue them a card, it’s possible that fintech companies may be able to provide banking products to clients who would not have been qualified for such goods under traditional criteria.
New opportunities to help develop credit, include the following: Even if some companies now provide new ways to build credit, you may still improve your odds by making use of the systems that are already in place. This is because you have access to the systems that are already in place.
Checks may be processed by some fintech companies up to two days sooner than they can be handled by a traditional bank. This can be significant time savings. This makes it possible for workers in fintech firms to get their payments in a more expedient manner.
Better rewards: In the past, credit cards were the most popular incentive option; however, fintech companies are now attempting to enhance reward programs in a variety of other ways.
In most cases, the advantages and rewards rates that come with conventional bank credit cards are of a higher caliber than those that come with credit cards issued by fintech companies. On the other hand, customers who use fintech banking platforms get free banking services regardless of how much money they have in their accounts or how many transactions they carry out.
It’s Possible That Customers Will Experience Obstacles
There is a prevalent misconception that using fintech cards does not involve any kind of danger since these cards are sometimes monitored by government regulatory bodies, which adds to this misconception.
Having said so, it is essential to be conscious of the fact that they are connected with a few risks, which may be potentially harmful. Some fintech companies are getting ahead of the law that is intended to protect their customers by doing so because Silicon Valley has the ethos of “Make it first, fix it later.”
For example, the Securities and Exchange Commission (SEC) recently filed charges against the financial technology firm Robinhood, saying that the company deceived customers about the functioning of its business model, more especially regarding the sources of the company’s revenue. Read more here https://www.sec.gov/.
It is possible for errors to take place even when the banks that underlie the technology have FDIC insurance (and it is always a good idea to make sure that there is one behind the technology). Beam banking software advertised an annual percentage yield (APY) of 4% for accounts that were FDIC-insured. However, some customers were unable to withdraw cash when they needed them, which is what prompted the Federal Trade Commission to take action.
How to Opt for a Trustworthy Piece of Financial Technology
To get the most out of your credit card or debit card, you should check to see that it has all of the following features:
- FDIC insurance
- Perhaps no costs at all
- Free use of the automated teller machines that you make use of Rules that can be understood without an excessive amount of mental work being required from the user
- A favorable response from the company’s clientele, preferably compiled over a lengthy period of time
- Before making a final choice, it is important to think about whether or not a fintech credit card fulfills all of these requirements.
The Influence of GoCardless on Financial Technology Payment Methods
Additionally, fintech has had a significant influence on the payments business, which has resulted in a significant increase in the ease with which one may manage and transfer their money. Alternative payment providers such as Apple Pay are easing personal and commercial transactions via the use of technology. At the same time, other, more creative fintech payment companies (for example, DailyPay enables workers to pick when and how frequently they are paid) are helping to broaden the boundaries of fintech as we go ahead.