Since the advent of online banking, the financial industry has undergone several important changes. Meanwhile, terms such as fintech (i.e. financial technology) has become part of the everyday journalistic jargon, pointing to rapid innovation and change.
Besides the development of new apps and decentralized technologies, new participants have entered the industry to the benefit of the public. Here we take a look at some of the most profound and important changes taking place within the financial sector.
Blockchain equals the decentralization of banking
Banking as a profession has been around since the dawn of time, having played an integral role in human history. Banks fuel the economy with access to capital and help us acquire the assets we need. Whether it be the purchase of real estate, credit cards or automobiles, our banks are there to help.
But there’s a catch-22 to the way banks operate. Namely the fact that the entire industry is heavily centralized. Try sending $ 100 as a payment between the United States and a country in far east Asia, and you will soon witness the pitfalls of centralization.
Banks control the flow of money through interest rates, forex conversion fees and multiple other mechanisms. They feed off the economy with what some consider draconian fees, with such examples as overdrafts and the conversion of USD to foreign currency.
And that’s where the new blockchain technology enters the discussion. A decentralized network of nodes, where no funds can be transferred without public consensus. The blockchain can be applied to any electronic currency, of which bitcoin is the most well known. It breaks down the banks monopoly on monetary payments with microscopic fees and rapid transfers.
What about financial intermediaries?
The importance of financial intermediaries should not be underestimated. They play a vital role in our modern economy as a source of information. Anyone who has ever applied for a mortgage, credit card or unsecured loan knows how difficult it can be to analyze complex credit offers.
Financial intermediaries break down complicated rules and mathematical formulas into layman terms. They speak the language of ordinary people, while helping us make the right decision. A well informed consumer can save considerable sums of money through the reduction of interest rates and fees.
One relevant example is the European consumer portal billigeforbrukslån.no, known among its visitors as a source of high grade information. Having meticulously studied financial offers they’ve created an API based application that collects information in real time (see our example below).
The future of finance
Change within the financial industry will largely be driven by new technology, which democratizes the transfer and storage of monetary instruments. Unfortunately, new technologies are currently stifled by archaic regulations in the form of AML (anti-money laundering) and KYC (know your customer) requirements.
Luckily, it only remains a question of time before blockchain and other technologies break down the remaining barriers. Online banking was a major step in the right direction, but there is more important work to be done. Especially when it comes to the lending industry and which fees are being paid by consumers.