According to findings recently published by the United Way ALICE Project, 43 percent of households in the United States don’t have enough monthly income to pay for basics like housing, food, and transportation. In other words, nearly half of all people living in this country are struggling just to afford a basic lifestyle.
Fintech products might be the key to addressing this major economic problem, however. Those who study the fintech revolution have noted how these products are helping people to improve their overall financial well-being in several different ways. Here are just a few examples.
Helping People Save Money
A relatively simple method for anyone to understand their finances is to use a fintech product to make a monthly or yearly budget.
While most people do know they should create a budget for both the month and the year, the problem is that not everyone is skilled at doing so. More importantly, keeping your budget on hand whenever you’re making a purchase simply isn’t feasible in many situations.
That’s why budgeting apps are useful. They make the process of creating a budget intuitive, and since you can access them from your phone, it’s easy to refer back to it whenever you’re not sure if you can justify buying something. While these apps certainly can’t help a person earn more income, they can help a person maximize the income they do make.
Expanding Access to Investment Opportunities
It’s important to note that investing in the stock market (or any similar market) always carries with it some degree of risk. You can’t be entirely certain that an investment will pay off. Thus, it’s necessary to do thorough research if you do plan on investing.
That said, people who conduct the proper amount of research often reap the benefits. That’s why it can be a smart way to generate wealth.
The problem is that until recently, some people didn’t have as much access to investment opportunities as others. That’s because traditional brokerage firms charge fees for every transaction. For someone with a high net worth, those fees aren’t likely to impact their decision regarding whether to buy or sell an asset. However, people who make less money may find these fees prohibitive.
Fintech has changed that. Investment products like Robinhood allow users to buy and sell assets without incurring broker fees. That’s because, unlike traditional firms, Robinhood doesn’t operate any brick-and-mortar locations. Thus, the company saves money on overhead, passing the savings onto the consumer.
Again, while investing can be dangerous, having the opportunity to grow wealth this way can have a dramatic impact on a person’s financial well-being.
Access to Capital
As this blog has pointed out in the past, fintech-based lending companies are making it easier than ever for small business owners to expand. But don’t make the mistake of assuming it’s because such companies engage in predatory lending.
Actually, small business owners can acquire the funds they need more easily through fintech-based lending companies because these companies have access to digital technology that shows a more comprehensive picture of their customers’ financial status. Banks and other traditional lending firms often have a limited picture of a person’s overall credit-worthiness. Therefore, fintech companies have the advantage in determining whether a customer is a risk.
What this means for struggling business owners is that they now have more opportunities to grow their business. Often, small businesses serve their local communities, and thus, when they grow, allow everyone in the area to benefit from increased employment opportunities, creating a ripple effect that can improve the overall economic health of a particular area. That may be one reason why fintech is often embraced readily in developing countries and regions. By giving people greater access to financial services, these products allow the entire region to thrive. Thus, even if a person in dire financial straits doesn’t own a business, they can still benefit indirectly from the impact of fintech-based lending firms.
That’s one reason why there may be hope for America’s struggling households. Despite some less-than-positive statistics, there’s reason to believe that the fintech revolution will help address some of the factors that have resulted in nearly half of Americans being unable to afford the monthly basics. Whether they benefit directly through a budgeting app, or indirectly through local economic growth, these people may soon find that technology is helping them escape financial hardship.