Per wIt seems like the second you enter adulthood, and often
even before, personal finance management becomes top priority. The need for
better money management soars as the world continues to change. Fintech, short
for financial technology, makes money management quicker, easier, safer, and
more efficient than ever. Here are 10 ways fintech can help you better manage
your personal finances across virtually every financial field.
1. Bank More Quickly
Gone are the days when you had to go to the bank to check
your balance or even deposit your checks. Most financial institutions offer
online banking in multiple forms, including telephone, website dashboards, and
apps. You can check your balance, transfer money between accounts, pay bills,
and deposit checks. This helps you get your banking done from anywhere at any
time, so you never have to worry about making time to take care of your
finances.
More than 196 million American adults now use digital
banking solutions. This figure skyrocketed amid the pandemic as going into a
physical location became a matter of public health. The digital banking
revolution also grew as more young people familiar with the speed and
convenience of social media started taking control of their finances.
Convenience is far from the only benefit of faster banking,
too. Quicker, more intuitive transactions help keep track of your spending more
efficiently. Digital banking apps will show transactions and adjust figures
almost immediately, eliminating the confusion that comes with delayed records
and payments.
This quick access can also help you review potential
purchases and double-check your finances in the moment. You no longer need to
travel to a physical bank or ATM to check your account balance or pending
transactions. You can do it from your phone in seconds, helping you see if you
can comfortably afford a purchase without any guesswork or delay.
2. Budget More Transparently
Many apps now on the market easily connect to your financial
institution to help you plan and budget your finances. These budgeting apps use
real-time data from your bank to give you a clear picture of your spending
habits.
They often break things down into categories, including
groceries, bill payments, and dining out. Then, they calculate how much money
you save. This overview gives you an insight into where most of your funds are
going. Analyzing this information allows you to make more informed decisions on
resource allocation.
For example, you may look at your budget breakdown and
realize that most of your paycheck is going to your car loans or mortgage. You
can then refinance one or more of those loans to save money or lower your
monthly payment. Maybe you find you’re spending a significant portion of your
paycheck on lunches at work. You may look at these numbers and decide
meal-prepping would be a more financially beneficial option.
3. Understand Your Credit Score
Credit scores are the leading determining factor for whether
you can get a loan, credit card, or similar resource. Despite how crucial these
figures are, most people misunderstand how they work. Credit scores are based
on five core factors, not just one or two, and not knowing that can lead to
poor choices. Fintech aimed at users’ personal finances can help clear things
up.
Many fintech apps include credit score monitoring and
advice. These make it easy for users to get a picture of their financial
health, at least how lenders see it, and adjust as necessary to improve it.
More people are taking advantage of these resources, too. In 2018, 57% of
American consumers checked at least one credit score, up from 49% in 2014.
This increased awareness has a considerable impact on
financial choices, too. The same study found that 93% of those who check scores
know that mortgage lenders use them, compared to just 74% of those who didn’t
check. The accessibility of credit score apps has helped more people become
financially literate, understanding their current position.
Apps like Mint and CreditWise let users see what factors
impact their scores and how their actions are changing them. With that
information and easy monitoring, you can make more informed decisions to
improve your credit, helping secure better loan rates and credit cards in the
future.
4. Improve Security
Security has always been a leading concern with money, but
the rise of digital finances brings new challenges. The mass shift to digital
services has many benefits, but it came with a 311% increase in identity theft
between 2019 and 2020. Thankfully, fintech also provides solutions to make
digital payments more secure for everyday users looking to take charge of their
money management.
Fintech’s focus on disruptive technology helps it stay on
top of security developments. These apps are always adapting to new tech
trends, including integrating the latest security innovations, because it’s a
crucial part of how they stay competitive. On the other hand, traditional banks
often apply technology as an add-on to their existing systems, leading to
vulnerability. As a result, conventional banks are losing more money to hackers
than fintech alternatives.
Fintech has led to massive improvements in security within
personal finance. Visa is one of many companies that has started to use machine
learning to detect and stop fraud. Since implementing this technology, Visa
says its fraud rates have fallen to 0.1%, thanks to the AI’s ability to monitor
500 unique risk factors.
Fintech apps like PayPal and CashApp also let you send money
securely through heavily encrypted transactions. That way, you can pay someone
back or buy something online without fear of losing funds or data in the
process. Less risk and more protection translate into more money in your pocket
in the long run.
5. Reduce Financial Mistakes
You can also minimize financial mistakes with the help of
artificial intelligence. Whether it comes to loan payments, investment
opportunities, or day-to-day banking, fintech does the math for you. It also
can alert you when an error is detected. Most applications will send you alerts
for overdrawn accounts, suspicious activity, or payment reminders to keep you
informed and reduce the risk of any financial errors or red flags.
Fintech’s general visibility also helps reduce mistakes.
It’s easier to spot trends or unusual actions when you can see a complete
picture of your financial history with the push of a button. You can then
notice choices you’ve made or third-party errors that affect your finances.
You’ll make fewer mistakes over time if you check these records regularly.
Fintech combats the demand of more than 50% of consumers who
wish to have 24/7 access to customer service. It provides instant access to
resolve any financial issues that lead to unneeded and unwanted stress. If
mistakes do occur, you can address them immediately. You can then solve the
issue before it becomes a larger, more stressful problem.
Resolving these issues is often easier than with traditional
systems. Fintech apps aimed at financial management rely heavily on chatbots,
which give you 24/7 support and immediate access to help. You won’t have to
wait for an available agent to resolve your problem if you have a common issue.
If it can’t fix it for you, it can help gather the necessary information so a
human agent can help you faster.
Chatbots can answer up to 80% of routine questions, helping
resolve issues far faster. You can then spend less time worrying about your
finances and more time making the most of them.
6. Save Money Without Having to Think About It
Fintech allows you to automate your savings in different
ways. Some apps can automatically send money to your savings account based on
your actions. Many financial institutions also offer the ability to round up
purchases to the nearest dollar and put the extra change directly into your
savings. These programs make your life easier because you don’t have to think
about it.
Acorns rounds up your purchases and invests the money in
exchange-traded funds, helping you make money off stocks with minimal activity.
Digit analyzes your spending and income patterns to determine how much you can
comfortably save, helping you set and meet goals. No matter your money
management goals, there’s likely a fintech app to help you achieve them.
Many fintech apps also offer more effective savings alternatives
to traditional banks. The average national interest rate is 0.06%, but
inflation is roughly 5%, so many people effectively lose money. Neobanks,
fintech alternatives to traditional banks, can offer higher interest because
they don’t face the same expenses as conventional institutions.
Chime offers a 0.5% annual percentage yield (APY), far more
than a traditional bank, and it provides it even if you only have a penny in
your account. It can afford to do that because it doesn’t have a traditional
bank’s high staffing and overhead costs since it’s entirely online.
7. Consolidate Debt and Bills
Debt is a common issue for many people. The average American
has $90,460 in debt, often spread across multiple areas, from credit cards to
student loans to mortgages. Having outstanding loans in so many places can make
it difficult to understand and address, but fintech has evolved in its personal
financial management abilities to let you consolidate debts and bill payments
in one convenient place.
Apps like Prism and Tally let you keep track of all your
debts in one place. You can input the date that each bill is due, and it will
send you a reminder when it is time to pay it. You also can automate payments,
so you never have to worry about missing one. Some of these apps will calculate
and prioritize your debts to pay the highest-interest ones off sooner, helping
you become debt-free in less time.
Other fintech personal finance solutions offer innovative,
easy ways to pay back your debts. Qoins works like Acorns, rounding up your
purchases to the nearest dollar, but instead of investing that money, it uses
it to pay off your loans. Debt Payoff Planner will calculate ideal payment
schedules based on your outstanding debts and monthly budget.
Fintech can offer similar help for your everyday bills, too.
Budgeting apps will keep track of all your monthly expenses and put them in one
place so you don’t forget about them. You can then get a better picture of your
spending and stop subscriptions you no longer need that you might’ve forgotten
about.
8. Shop Around for Loan Offers
Fintech makes it simpler than ever to compare loans if you
have to take out a new one. Traditionally, you’d have to contact various banks
and lenders independently to see what they’ll offer you and compare them
yourself. That can take a tremendous amount of time, but fintech streamlines
the process.
With apps like Nerdwallet, Credit Karma, and LendingTree,
you enter your information once, and loan offers to come to you. You can then
see them all together to compare interest rates and terms and make an informed
decision for your budget. This saves time since you don’t have to shop around.
It also saves money by having enough information to make the best decision for
your financial goals.
Fintech has also made loans more accessible. Many fintech
companies offer loans, often targeting consumers that wouldn’t be able to get a
competitive rate from traditional lenders. These new, tech-forward lenders
either take advantage of their lower expenses or look at more factors than just
credit scores to determine creditworthiness.
Studies have found that fintech has let people with the same
credit risk obtain it at lower rates than traditional channels. People with few
or inaccurate credit records also have more access to loans through these
programs since they look at more than credit scores. As a result, fintech has
made lending a fairer, more equitable field.
Fintech also provides new ways to get loans, such as
crowdfunding and peer-to-peer lending. These services let you get funds from
other consumers, bypassing the intermediaries traditional loans carry. As a
result, it’s possible to get interest-free, independent loans.
9. Achieve Your Financial Goals
Fintech uses artificial intelligence to help you make better
investment decisions at a low cost. Fintech’s low cost allows nearly everybody
to have access to personalized finance recommendations, including how to best
save for retirement, without paying costly management fees. These solutions are
customized to the individual so they can reach their personal financial goals.
These machine learning systems make advice more accessible.
You can now get reliable guidance by plugging some information into an app
instead of scheduling a meeting with a human consultant. That saves you time
and money, making financial services available to people who previously
couldn’t access them.
In 2021, 3.5 million U.S. investors used these robo-money
advisers to help them make the best investments. Experts predict that number
will keep growing at a double-digit percentage, resulting in 5 million
investors using these tools by 2025. These technologies will gain more
experience with use, leading to better advice.
Machine learning models become more accurate as they have
more data points and patterns to analyze. As a result, when more people use
these tools and generate more data, these predictions will become increasingly
reliable, just as people get better with experience.
10. Discover New Personal Finance Opportunities
Fintech has also opened the door to new ways to make and use
money that didn’t exist before. Cryptocurrency is the best example of this
innovation. Crypto provides a transparent, secure alternative to traditional
financial institutions without the high fees and confusion that come with
intermediaries in conventional finance.
Crypto uses a technology called blockchain, a digital ledger
of records that anyone can see but no one can change. As a result, you can see
where your money is going in a crypto transaction and have a readily available
record of it, giving you more control over your finances.
This transparency and security could have widespread
implications across finance. Charitable donations in cryptocurrency rose more
than 1,000% in 2021 because crypto makes it easier to ensure funds actually go
toward the cause in question. Related tax benefits also make it more enticing.
Since crypto is worth the same worldwide, it also enables
quicker, more affordable international payments. Removing conversions and
intermediaries from the equation eliminates fees and completes the process
faster. As a result, it’s easier to engage in international business with
crypto.
Blockchain technology could also bring more opportunities as
it develops and gains popularity. These digital records could revolutionize car
rentals, providing more visibility into a vehicle’s history and removing
contract disputes between parties through smart contracts, which execute
automatically. Fintech has likely only scratched the surface of what
blockchains can do.
Take Control of Your Personal Finances With Fintech
Fintech is the newest wave in personal finance management.
It’s trending to be the faster, safer, and more efficient alternative to
reaching financial goals than traditional methods. If you can capitalize on
these technologies, managing your finances doesn’t have to be such a daunting
challenge.
The industry will continue to respond as the market changes
to help you manage your money. New fintech technologies and services aimed at
personal finance will emerge, providing even more options to help you meet your
specific goals. Staying on top of these developments can help you make the most
of your finances.
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