Spotlight – The Possible Fintech Problems on the Horizon

Spotlight – The Possible Fintech Problems on the Horizon

The fintech revolution is in full swing for one very good reason: startups are leveraging technology to offer consumers a more convenient experience than the kind they get from traditional financial institutions. Industry leaders like Don Gayhardt (the president and CEO of CURO Financial Technologies Corp) agree that fintech is set to disrupt the financial services sector in a major way, forever changing how we spend, save, and invest our money.

However, there are some challenges that lie ahead. Market solutions will surely address them, but it’s still important to acknowledge they exist. Fintech companies, traditional banks, and consumers can probably expect to grapple with the following issues in the near future:

Consumers and Businesses Using Different Technologies

Services like Venmo make it easy for people to request and send funds via their smartphones, adding an extra degree of convenience to the model already established by companies like PayPal. However, in order to send or receive money through these services, both parties must have accounts.

In all likelihood, other services that facilitate convenient transactions will emerge in the future. This means that more and more individuals and organizations will rely on them as their primary means of paying for a purchase. This presents a unique problem.

Right now, there are fairly universal methods of buying goods and services. You go to a website or walk into the store and hand someone your cash or credit/debit card. If more people begin using fintech products to pay for goods, we may find ourselves struggling to agree upon which product we should all use.

It’s not reasonable to expect every person, business, and organization to create accounts with every e-transaction product on the market. Therefore, we’ll have to find a way to establish some universal method of conducting transactions in an age where fintech-based transaction services become, if not the norm, even more widespread than they already are.


Not Everyone Having Access to the Necessary Technology

Many industry insiders believe that fintech banking will replace traditional banking entirely in the not-too-distant future. As a result, brick-and-mortar banks will become obsolete, and people will obtain financial services entirely via computers and smartphones.

This new paradigm will help unbanked and underbanked populations gain access to financial services currently unavailable to them. In fact, innovative, non-traditional lending firms (like Speedy Cash and Rapid Cash, operating under the umbrella of Don Gayhardt’s CURO Financial Technologies Corp) are already helping people who might otherwise struggle to obtain loans get the funds they need to grow their businesses.

That being said, there are still people who don’t own computers or mobile phones. Often, this is due to poverty, but it can also be the result of a personal choice. Not everyone wants to embrace today’s otherwise-ubiquitous technology. Consequently, if fintech services replace banks, a new kind of underbanked population will emerge: those who don’t use or have access to the necessary technology.

For the most part, fintech is expanding people’s ability to take advantage of financial services. We just need to remember that it’s not a universal solution.

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Too Much Convenience Leading to Overspending

Fintech is making conducting financial transactions easier than ever. Soon, we’ll be able to pay for most items with nothing more than a swipe of our smartwatches. However, this degree of convenience might be dangerous for people who tend to be irresponsible with their money. The easier it is to make a transaction, the more likely these people are to buy goods and services they don’t need and can’t necessarily afford.

Again, market solutions will help us limit this danger. While fintech does make it easier to overspend, it also makes it easier to budget. PayPal, for example, is currently creating tools to help people have more control of their money; this includes placing spending thresholds and sending notices about purchases. Other fintech firms are sure to follow.

Thus, in the future, when someone who has a tendency to buy more than he or she can afford attempts to make an irresponsible purchase, the app he or she uses might first alert the person to the fact that, given his or her budget, this purchase is not a smart choice. Granted, there’s probably no ethical way to let an app completely prevent someone from making unwise spending decisions, but the technology can at least leverage the individual’s overall financial picture to help him or her better assess whether or not conducting a given transaction is a good idea.

Fintech’s impact on our financial lives will undoubtedly be a positive one. However, it’s important to anticipate these kinds of potential problems in order to proactively develop effective solutions.

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