What is “fintech”?
Financial technology — “fintech” for short — is a rapidly emerging industry that uses technologies such as AI, blockchain, and data science to improve services and products in the financial sector. According to Newsroom, fintech investment skyrocketed from $1.89 billion in 2010, to $27 billion in 2017.
While not necessarily a new industry, fintech has evolved very quickly. If we follow its trajectory — credit cards, ATMs, e-trading, personal finance apps — it stands to reason that the next evolution would involve a holistic financial overview and tools to increase personal wealth.
Previously kept at arms’ length, fintech companies are now embraced by financial institutions seeking to invest in and partner with these disruptors. Ultimately, these technologies make banking in the digital era efficient, safer and faster, and touch nearly every aspect of finance, both in personal and B2B finance.
Fintech and Young People
It seems the rapid development of fintech would blend synergistically with younger generations looking to boost their financial savvy. According to popular media pundits, members of Generation Z (those born in the mid-1990’s) have used digital media from a very early age, and are most comfortable using the internet and social media.
Tim Sheehan is the co-founder and CEO of Greenlight, a fintech startup that offers a debit card for kids and a mobile app for parents. He tells Parentology that these tools work together to empower parents and their children to safely manage family finances and create teachable moments around earning, spending, saving and giving.
“Tech is embedding itself in every industry – ‘Software is eating the world’, as they say – and it’s creating better offerings for consumers,” he says.
In addition to lending, trading and cryptocurrency, fintech has some very real applications that are already leveraged by the average techno-agile teen or tween. “Parents can take advantage of the digital age to teach their kids about money,” says Sheehan. “Ultimately, the goal is to ensure that they’re financially stable when they’re older, but that’s a process, and starts with a good foundation of basic concepts.”
Some areas that fintech is already disrupting include:
Financial institutions have answered their customers’ demand for easy digital access to their accounts. Most banks now have an app that can be accessed on a mobile device and transactions can take place with a simple swipe.
Investment & Savings
There’s been a steady rise in the number of apps that use a combination of savings and incremental investing to ease new users into this brave new digital world. Greenlight fits perfectly in this milieu. Entrenched in the main financial pillars of saving, spending, investing and giving, the Greenlight debit card offers features such as real-time transaction notifications, automated allowances and parent-paid interest on savings to get families into the habit of making sound financial decisions.
Fintech is very good at allowing consumers to move money around on demand. Consider, for example, the number of times you might hear “I’ll e-transfer you later,” in the average week. It’s easier than ever to send money globally and instantaneously, using apps such as Venmo, Paypal, and Square.
While fintech offers people a world of opportunity with regards to the pace, frequency and efficiency of digital banking, Sheehan cautions parents to be aware of some of the pitfalls.
“Kids can get focused on the novelty of a card because it makes them feel grown up, so you want to ensure they understand that the actual account has a certain number of dollars in it and as we buy things, the balance goes down, etcetera,” he says. “You want to make sure they connect the dots and connect them with real money.”
Most important, Sheehan implores parents to tell their children to keep their digital identity safe. “We [Greenlight] provide content, but parents need to reinforce that pins are the secret password and not to be shared,” he says. “Ditto for their card number, the CVV code on the back, and so on. Make sure you have those privacy conversations.”
Sheehan sums it up, saying, “Fintech, at its core, is an opportunity to have conversations about online security and privacy with your kids, and it’s never too late to start.”