Just when you thought investing wasn’t for you, innovative technologies have emerged to make it possible and extremely lucrative. The exciting changes that have been rung with FinTech (financial technology) are astonishing. Consider that in 2014 alone, a staggering sum of $13.7 billion was invested in the FinTech space alone. The annual rate of investment in this arena is 45%, and growing. The year on year deal growth is 16.41%, and climbing fast. What’s equally important to point out is that venture capitalists are eyeing FinTech with greater interest across the board. In 2010, there were a handful of FinTech investors, but by 2015 that number had swelled to 894 unique investors. These are big market players, including the likes of Goldman Sachs, J.P. Morgan Chase, Bank of America, Wells Fargo & Company, Santander, and others. In 2014, the latter company invested $100 million in a fund earmarked for FinTech.
Why are these changes in the financial landscape so important, and how do they apply to individual traders and investors?
For starters, the global financial crisis that erupted in 2008 spurred a rush towards financial alternatives in the market. Big banks cut their budgets by closing departments, divisions and firing people en masse. All of these professionals decided to venture out into alternative startups. This resulted in the FinTech revolution. The rapid growth of peer-to-peer lending, a glut of qualified professionals, and a market hungry for change led to the FinTech revolution. Contactless payment systems are changing the way people do business, pay for products and services, and conduct their banking activity. Contrary to popular opinion, it’s not the banks who are spearheading these initiatives – it’s non-bank companies. The irony is that major banking corporations like Bank of America, Wells Fargo and Citibank are now investing heavily in FinTech technology to play catch-up with these other corporations. Many more startups have sprung up in Silicon Valley and elsewhere to accommodate the burgeoning demand for financial technology innovation.
What Is Happening in the Loans Industry?
Money lending is one of the biggest businesses in the world. Everybody wants it and only a handful of individuals and corporations have it. Banks have heretofore monopolized the money lending industry, but not anymore. Banks are smart in that they charge more on loans than they pay on savings. Other companies have infiltrated this space, and now they have squeezed all the margins that banks were making and they are offering cost-effective solutions for borrowers. Peer to peer lending, otherwise known as P2P, is a global phenomenon. Banks have disadvantaged themselves by taking an inordinate amount of time to approve customers for loans. With P2P lending, people can be approved within hours. The user-friendly nature of peer to peer lending has revolutionized the FinTech sector in a big way.
Trading has been Completely Disrupted
The trading and investing industry has been turned on its head in recent years. Think back to the way people invested in stock markets, or traded stocks, commodities, indices, or Forex in the past. Typically, people would have to complete lengthy registration forms, wait for approval, and then have institutional brokers trading for them. The advent of online trading was the first step towards personalizing the trading sector. With more flexibility, lower costs per trade, and more trading options, traders are now able to maximize their performance in the financial markets at the click of a button.
Mobile trading is one such FinTech evolution that has completely upended convention and put the financial markets within reach of anyone at any time. Further disruptive elements are available in the form of social trading. This is perhaps the most groundbreaking innovation in the trading arena yet. eToro copy funds is a great example of how you use the wisdom of the crowd – the power of the crowd – to make informed trading decisions vis-à-vis underlying financial instruments. You can see what other successful traders are doing with 100% transparency, copy their trades, and profit accordingly. This type of innovation was unheard of just a few years ago, but today it dominates the scene at the best brokers.
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