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April 23, 2017

Rapid Evolution of Fintech and Online Investments

In the modern economy, it is the frontrunners of finance that are playing catch-up with the leaner, meaner and more Internet-ready social finance companies. Traditional merchants are rapidly changing, and adopting disruptive FinTech technology as accepted payment methods from their clientele. Banks such as HSBC, Wells Fargo & Company, Bank of America, and Citibank find themselves scrambling to keep pace with the offerings of e-wallets and a wide range of mobile payment services providers. Now, banks are investing heavily in value-added services and apps to appease merchants and customers alike.

Merchants certainly don’t want to be paying exorbitant costs for using bank-based credit cards, debit cards and other payment options. This is not only from the client side, it’s from the business side too. As such, cost-cutting initiatives are well underway and disruptive technologies are being implemented for greater efficiency. Not only does this save money, it also boosts customer satisfaction levels and offers a unique and efficient way of transacting. During 2016, the popularity of mobile payments rose by 40%+ in the US. Now, SMEs need to be able to compete with the giants of e-commerce such as Alibaba and Amazon by offering cost-effective, convenient and customer friendly payment solutions.

FinTech startups now rolling out alternative tools

The App Store and the Google Play Store are two venues where customers can access the latest financial technology applications. However, other services such as VAAS are now being rolled out as well. This open payment platform is ideally suited to small business, as it offers a complete payment solution using electronic payments as the norm. In 2017, it is estimated that some 45%+ of POS (point of sale) systems will be mobile based. This will certainly usher in a new era of apps dominating the transactions process.

Banks certainly have the financial clout to compete with these leaner and more dynamic payment services providers, and they will also be positioned to offer multiple payment options including backend solutions and loyalty programs for customers. Customer attrition has certainly been a factor that has hindered the growth of mobile banking at traditional banks. Now, banks have an opportunity to regain their footing and compete effectively with their hardware vendors using the POS systems.

Social Trading Disrupts Conventional Trading Activity

FinTech technologies have rapidly evolved over time, and we see this in the proliferation of social trading online. Social trading networks present clients with opportunities to trade entirely online with others. The most successful social trading companies are the ones offering full licensing and regulation to traders. These are typically licensed by the FCA (Financial Conduct Authority), CySEC (Cypress Securities and Exchange Commission) and the FSB. Social trading eliminates the need for registering at a traditional broker and allowing a financial advisor to manage your funds independent of your input. These disruptive trading companies have taken the industry by storm, and include the likes of eToro and Tradeo, among others.

With social trading, the focus is on the social aspect of interacting and engaging with fellow traders within a community of like-minded individuals. It is possible to trade currencies, commodities, indices, and stocks by watching what others are doing and copying their actions. Most of the time, these actions can be copied automatically. This is an example of the disruptive aspect of social trading on an industry that did things one way for so many years. Banks are not sitting idly by on the sidelines: They are working with various payment solutions and FinTech organizations to offer alternative options to traders and investors. A rapid realignment of financial resources and personnel is being undertaken at major banks to achieve greater efficiency and appeal with traders.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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Item Reviewed: Rapid Evolution of Fintech and Online Investments Rating: 5 Reviewed By: Econ Matters