The Future of the Personal Finance Industry
The gradual process of financial digitisation has been dramatically accelerated by the COVID-19 pandemic. What new innovations can we expect to see soon?
John Ellmore, Director of KnowYourMoney.co.uk, investigates emerging trends in personal finance and the fintech driving it.
A lot has changed over the past 20 years. We are now living in a world where home assistants and smartphones have become the norm, and as a result of these great leaps in technology, people are increasingly relying on their devices to make their lives easier.
The coronavirus pandemic has only driven the need for such technologies even further. With the implementation of social distancing measures and nationally enforced lockdowns, consumers have seen a complete overhaul to their day-to-day lives. Consequently, 57% of consumers now prefer to use online banking tools to manage their finances; pre-COVID-19, less than half (49%) of consumers preferred online offerings.
With more consumers opting to use online offerings to look after their cash, it’s clear that this change in consumer mentality is here to stay, and it hasn’t just been limited to online banking.
Fintech: Revolutionising Personal Finance
The personal finance industry has come a long way since the turn of the century. Indeed, the rise of financial technology (fintech) has transformed the way in which service providers are able to engage with their customers. In short, fintech has simplified the complicated personal finance industry, making it far more accessible for the average consumer.
One factor which has been instrumental to such changes is the rise of comparison websites.
The previous two decades have seen a growing number of consumers relying on comparison websites to save money on everything from their car insurance to credit cards. And it seems that the popularity of comparison websites will not falter any time soon, with research from the Competition and Markets Authority revealing that 85% of UK consumers have used price comparison websites at some point in their lives.
The previous two decades have seen a growing number of consumers relying on comparison websites to save money on everything from their car insurance to credit cards.
So, what exactly has driven the popularity of comparison websites? Put simply, they take the effort out of researching and comparing financial options. By gathering all of the data and consolidating the available options in a clear and concise list, consumers have been able to investigate their choices without conducting hours of monotonous research.
However, it is fair to say that this this offering is in a constant state of change, and we are seeing the fintech industry adopting highly complex algorithms at a rapid pace. As these algorithms are now able to make rapid assessments of risk using an individual’s financial data, it is now possible for comparison websites to offer more targeted results. Consequently, the personal finance industry creating a more tailored, personalised service for consumers.
Advancements in Digital Banking
The growing popularity of comparison websites has been complemented by the rise of online banking. Indeed, consumers are now looking for convenient digital offerings from their banking provider, be it an established high street bank or a virtual challenger bank.
Consumers now demand easily accessible and user-friendly online platforms to make the management of their personal finances a far more streamlined. So, by offering smart analytics, user-friendly app designs and real-time payment notifications, banks have made it easy for consumers to always be aware of their outgoings and any fraudulent activity in their accounts. With saving made easier and safer than ever, now consumers can watch their wallets without ever having to leave the house.
It is clear that technology is playing an increasingly large role in the way we handle our finances, and the sector is primed for further innovation yet. So, with many useful developments in the pipeline, what does the future hold for the personal finance industry?
A Personalised Experience
Traditionally, most consumers would assume that one could only receive personalised, tailored advice with the help of a human adviser. However, the future is digital, and such regulated advisers could soon take the form of digital chatbots, or “robo-advisers”, powered by artificial intelligence (AI).
At present, such customer-facing technology does exist, but is still in the very early stages of its development. Indeed, such “bots” are only able to provide generic guidance to basic consumer queries. However, at the current pace of AI developments, it’s likely that further industry disruption is on the horizon.
Whilst it is unclear exactly when such advancements will be ready for consumers to use, it is plain to see that the technology will inevitably be used to drive the personalisation of the personal finance sector. I predict that in the coming years, we will soon see a new generation of empowered consumers who are able to take advantage of the greater choices, transparency and hassle-free experience driven by the ‘fintech revolution’.
Ultimately, the days of one-size-fits-all advice are numbered. The modern consumer should expect a streamlined process, which not only offers a wide variety of products to choose from, but also is tailored to their specific needs. What’s more, they should expect providers to act upon their decision immediately. Whilst humans can offer this service to an extent, only technology can offer such a sophisticated service to the masses.
Naturally, this will have a knock-on effect on the way consumers handle their finances, and savers should be on the lookout for new innovations that might help them better manage their money in the years to come.