In the grand scheme of things, the FinTech industry is a relatively new addition to the financial world. And like most new things, it’s met with suspicion. People are wary of trying new things, and it’s in this negative emotion where rumors start. By now, FinTech has a lot of myths attached to its name. This list aims to clear up the biggest ones.
1. It’s a fad
Anyone who lived through the late 90s would have survived the dot-com bubble. It started around 1997 when investors were so excited about the Internet they invested in any online tech company, regardless of its true worth or potential. In their rush to invest, these investors raised the market price by 5 times. The good times didn’t last, and by 2002, the bubble had burst. Not only did the price drop to its original cost, but 1 out of 2 tech companies failed as a result of the crash.
In a post-dot-com era, the memory of this crash is still strong, leaving many people suspicious of any digital trend.
While FinTech is the latest trend disrupting the financial world, it has staying power. As of March 2018, there were over 27 FinTech unicorns, with the top worth $18.5 billion. Unicorns are so named in the financial world because of how rare they are, as a private business needs to be worth $1 billion before it achieves this status. Though FinTech is a new and fast-growing sector, it isn’t destined to burst like the dot-com bubble.
2. It’s all about Bitcoin
Bitcoin, and other currencies that use Blockchain as a form of encryption, is a peer-to-peer (P2P) version of electronic cash. This cash doesn’t go through traditional financial institutions, so users can transfer money without any intermediation from the banks.
While Bitcoin and other cryptocurrencies capture most news headlines, these services represent only a small portion of the FinTech industry. A resounding 80 percent of U.S.-based FinTech companies are involved with digital payments or online loans instead.
According to the FinTech Market Report, digital payments have a transaction value of $927,070m in 2018. FinTech’s mobile banks like Chime and Simple contribute towards these numbers, but so do companies like Amazon and Walmart with their mobile wallet payment systems. Each year, the number of retailers that accept these payment methods increases, making it easier to pay for things and transfer money than ever before.
Meanwhile, FinTech’s lending opportunities represent a transaction value of $54,210m. They’re a growing alternative to traditional banking because companies like MoneyKey simplify the borrowing experience. They’ve moved what used to be a time-intensive event carried out in an office during specific opening hours to a website or app that works round the clock. While each lender will have specific conditions (you can visit MoneyKey to learn more), the basics include a no-hassle way for consumers to apply for, service, and repay their cash advance online without having to visit a physical location. A phone and their basic financial information are all that’s needed before they can connect with a lender.
FinTech may be one of the newer additions to the financial world, but that’s no reason to stay uninformed about what it has to offer. Don’t be fooled by myths and rumors. It’s not a trend tied to just one service, but a growing network of services that generate a lot of value.