Fintech, it sounds like just another buzzword. But fintech, or financial technology, is a booming and exciting new space - one in which innovation is the name of the game. Given the expansive role technology already has in almost every part of our lives, it makes sense that it will also be a major driver in the way the future banking and financial sectors are shaped.
But just how is technology changing these sectors, and what does it mean for the way Australians do their everyday banking and manage their finances?
From apps on our phones that make budgeting and saving money more straightforward to major changes in the way banks are set up and operate, fintech is aiming to make life easier for customers with faster, easier and more personalised banking.
But it doesn’t stop there. Whether you’re a tech lover or a finance guru, you’ll want to stay up to date with all of our fintech articles and guides, or if you’re just getting started, read on below for a deeper dive into the most frequently asked fintech questions.
When you think ‘fintech’ the first thing that probably springs to mind are mobile apps. But while apps are an integral part of the fintech sphere, especially when many Australians are becoming more reliant on their smartphones for their banking and financial needs, there is a considerable world of fintech beyond them full of different players and a range of emerging concepts.
Including everything from the banking apps you know and use everyday to industry-wide changes like the move towards open banking and the introduction of the new payments platform (NPP) in Australia, here are snapshots of some of the categories, concepts and fintech players related to banking and budgeting.
Naturally there’s a lot of overlap here with banking, but when it comes to paying at the checkout these are the fintech innovations that are already available or about to become the norm for many Australians.
On the other side of the fintech spectrum, new technology and innovations are also making investing more accessible for everyday Australians.
Insurtech, or insurance technology, is really a separate space altogether, but a lot of the core concepts and emerging changes to the insurance industry overlap with fintech. Basically insurtech is to insurance what fintech is to banking. So by better using technology and data, insurtech is aiming to improve processes, policies and create better value insurance products for consumers. Here a couple of ways insurance is changing:
The short answer is that it already is.
Technology is having a huge impact on the way we manage our finances and go about our everyday banking. Here are some of the major ways technology has changed and is changing the banking landscape in Australia.
1. Shifting the way we pay
While Australia is still a way off from becoming a cashless society, consumers are increasingly turning to their credit and debit cards, phones and even wearable payment technology in order to pay for their goods and services.
And given the move towards biometric security in smartphones, it’s hardly a stretch to imagine pincodes going the same way as cash. In fact, both Visa and Mastercard have announced plans to integrate biometric authentication measures like the use of fingerprints into their payment processes.
2. Moving online
Gone are the days of face-to-face meetings with your bank manager - at least, that’s probably the reality for many Australians. But given the mass adoption of smartphones around the world, it’s made complete sense for banks to increase their presence online as well as provide customers with online-friendly banking solutions like mobile banking apps which allow greater flexibility and financial control on the go!
Mobile and online banking adoption is likely to increase even more with the uptake of mobile and online-based instant payment services like Osko and Beem which piggyback off the NPP and allow users to transfer funds to each other near-instantly. Plus with the emergence of useful online banking features like roundup tools and spending categorisers, not to mention budget, savings and investing apps, mobiles are likely to become an even more alluring banking platform.
But it’s not just apps and other tools making online banking options more appealing for consumers. From peer-to-peer lenders providing online marketplaces with low-cost personal loans to online home loan lenders like loans.com.au and tic:toc offering low-cost mortgages, the internet has provided greater competition with the rise of more challenger lenders.
3. Opening the system
With a consumer-focused approach, open banking is set to seriously shake up banking systems across the world - and it’s already begun in Australia. One facet of open banking is mandatory Comprehensive Credit Reporting (CCR) which will change the way lenders assess applications for credit. Simply put, as CCR rolls out, lenders will need to share both ‘good’ and ‘bad’ borrower behaviour with credit bureaus, not just the negative behaviour (which has traditionally been the case). This means that not only will consumers have their credit history judged more accurately, responsible borrowers may be offered more alluring rates in the future.
Open banking and the greater sharing of consumer data is also likely to pave the way for even more ‘challenger’ lenders to hit the market. Digital-only neobanks like Xinja, Volt Bank and 86 400 are already gearing up in Australia, ready to offer consumers greater data insights and customizability of their bank accounts.
Fintech isn’t just for personal banking. Businesses are one of the largest potential beneficiaries of fintech innovations! The heap of online business loan providers which have popped up in recent years, for instance the likes of Moula and Prospa, are just one example of the competition which technology and innovation can bring about.
Another major potential benefit for business in Australia is the continued rollout of the NPP and the near-instant transfers between accounts from different banks that the platform provides. This could not only be beneficial when it comes to receiving payments from customers, but perhaps even more so when it comes to the ease and speed of payments between businesses themselves which has often been a burden to cash flow in the past.
Because fintech is still an emerging space the rules and structures surrounding it are still evolving, but that doesn’t mean there aren’t fintech regulations already in place in Australia.
But because of the speed with which new apps and platforms pop up, and because many fintech companies rely on user data and other information in order to offer their products and services, it could pay to do some research first.