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Fintechs transforming the US financial market!

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The existing financial structure in the United States of America has registered distinguishing changes in at least the last decade. This movement is mainly powered by fintechs; best known for revolutionizing the traditional ways of using financial services in America.

These innovative companies harness the use of technologies in arriving at efficient, easily accessible and customer oriented services. This article analyses the disruption of US financial market by futuristic fintechs, and looks at the areas in which those organizations have achieved major advancements. 

Fintechs company in the USA

Fintech is an abbreviation of financial technology and is the use of technology solutions to enhance and transform the existing products provided by financial firms. Fintechs in the US can be understood to have emerged in the post 2008 financial crisis’ environment.

While orthodox banking lost its credibility and failed to recover and comply with new legislations, new generation nimble fintech players were waiting in the wings to challenge conventions. 

Digital banking: Convenience at your fingertips 

Another, and possibly the most well-known, of the innovations brought about by the fintech sector is the presence of ‘neobanks’ which are banks that are entirely online and have no physical offices.

Chime, Varo, and Simple are among the pioneers that aimed to provide clients with banking services limited to the phone application. Such platforms include checking and saving account services, budgeting, and payment of paycheck in advance, with lower charges. 

Advantages of neobanks 

  • Accessibility: Neobanks are fully online services which enable consumers to carry out banking transactions at any time using applications. 
  • Cost-effectiveness: Since their overheads are considerably lower than those of the brick-and-mortar counterparts, the noble are able to charge less fees or offer better interest rates. 
  • User Experience: Modern design practices create intuitive, compelling experiences for banking’s core technical clientele. 

Personalized financial management 

Besides the regular transactions, many fintechs offer other sophisticated features of financial operations. Mobile applications such as mint and personal capital today both provide features for fully online bill management and spending tracking as well as investment advisory services.

These tools are helping its users to manage themselves or their organization’s financial needs and to make appropriate decisions hence promoting financial responsibility. 

Lending revolution: Redefining borrowing and lending 

Crowdfunding and social networks enable people to get loans without using the services of financial companies; such type of organizations is called peer to peer (P2P) lending platforms.

Some of the new companies like LendingClub and Prosper have extended the opportunities for borrowing money directly from investors. This model offers several benefits:This model offers several benefits: 

  • Lower interest rates: Since they eliminate the middleman and loan facilitation companies, P2P platforms have a possibility to offer lower interest rates than those of banks. 
  •  Access to capital: P2P lending, thus, provides credit to individuals and SMEs who may likely deem it hard to access loans from other sources. 
  •  Diversified investment opportunities: Thus, from the investors’ perspective, P2P lending could be interpreted as a new promising asset class. 

Innovative credit scoring 

Fintechs are also changing the approach to creditworthiness. Virtually, traditional credit scores that are normally determined by a few parameters effectively locked out the majority of people from borrowing Bodtker & Montgomery 2007.

Upstart and Petal are some of the firms that have integrated other data into their credit assessment models to determine credit risk. It enables a larger number of people to take loans and thus enhances the concept of credit inclusion. 

Robo-advisors 

Robo-advisors represent online-based advisory services where most of the work is done through computer programs which have limited human intervention. Various players that are currently present in the investment markets such as Betterment and Wealthfront have made it easier to invest. Here are some key features:Here are some key features: 

  • Low fees: It is common knowledge that all robo-advisors have lower fees than most human financial advisors. 
  •  Accessibility: They involve low amount of capital to be invested hence appropriate for those that are inexperienced in the share market. 
  •  Automated portfolio management: These turnkey portfolios are set up with the help of complex calculations and depend on a client’s risk tolerance and financial milestones to be achieved. 

Micro-investing platforms 

Firms such as Acorns and Stash have brought micro-investing concepts which involve investing the spare change. It is a model of apps that automatically converts consumers’ daily spending to the nearest dollar and invests the remainder in diverse funds.

This is the approach that enables one to develop a market with petty amounts with a similar practice of saving and investing initiated. 

Blockchain and cryptocurrency 

It was the fintechs that are still embraced with the incorporation of blockchain technology and cryptocurrencies into a conventional financial world. Apps such as Coinbase and Kraken facilitate trade in the digital currencies and enable one to store the currencies.

Due to the progressive implementation of the blockchain system, financial transfers can become more open, secure, and quick, which will define the development of the finance field in the future. 

Mobile payment solutions 

Mobile payment solutions have revolutionized the market on the consumption of various products. With Apple Pay, Google Wallet or Venmo, a user can pay using the touch of a button, eradicating the use of cash or plastic cards. These solutions offer: 

  • Convenience: Efficient and convenient processes especially through the mobile devices. 
  • Security: Improvement of the security measures like, biometric identifications. 
  • Integration: Complimentary to other portfolios and financial products and services provided in the market. 

Real-time payments 

Real-time payments are another major development of modern payment systems. New type of money transfer services that include Zelle and Square help the people when they wish to transfer money quickly and easily.

These systems get rid of the time-consuming of the normal banking transfer methods and increase the effectiveness of business dealings. 

Payment processors for businesses 

Fintechs have also brought changes in the processing of payments for business entities. There is nothing easier than using a ready-made solution, which includes such giants as Stripe and Square for online and in-store payment processing.

These platforms provide features for invoicing, subscription billing, as well as for identifying fraud cases in payments and many others to make payments for all sizes of companies efficient. 

The future of fintech 

Given the trends on the advancement of the fintech, the its influence in the US financial market is set to increase. As for the values, electrical energy, water supply, Internet of Things, artificial intelligence, machine learning, and blockchain technology appear to be the key innovations that will continue to push changes forward as far as efficiency, security, and openness of the monetary establishment are concerned.

They will be crucial in lighting up the financial sector and supporting the population and enterprises to attain their financial objectives. Therefore, fintechs are disrupting the US financial market with smarter answers to increase the market’s convenience, accessibility, and effectiveness.

Whether it’s mobile banking and P2P lending, robo-advisory, and mobile payment, these companies are revolutionalising the ways in which individuals access financial services. Due to technological enhancement that the future of fintech is promising and can contribute to the creation of a society with better systems of financial operations.

Marcello Barbosa
WRITTEN BY

Marcello Barbosa

Marcello works as a writer and copywriter, holding a degree in Marketing from Unopar. His passion for writing and sharing high-quality information with the world is evident. Additionally, he also enjoys one of his hobbies: online gaming.

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