The financial industry has been one of the most affected sectors by technology. As digital technologies advance, they push the boundaries of human activity and make it more convenient to access vital information, such as exact time and date. This has led to many changes in the finance industry, such as mobile banking and paperless transactions.
Here are seven ways that technology has changed the financial industry for the better:
Technology can now predict your creditworthiness by analyzing publicly available data on you
Technology has reduced the need for human employees at banks by putting tools in the hands of their customers. For example, one can now manage their bank transactions and accounts using mobile devices like laptops or smartphones. This also allows them to access 24/7 customer service.
Another factor that has led to fewer jobs in the financial industry is the increasing use of technology for back-end operations. Banks are no longer required to maintain large staff to process transactions. Even the use of ATMs has led to a decline in the number of bank tellers.
Faster and improved information processing
As technology improves, it becomes possible to process information faster and with greater detail. Customers can make smarter financial decisions by having access to real-time data on their accounts, assets, income, expenses, and credit ratings. This also allows them to be proactive in managing their finances rather than being reactive.
For instance, Mint is a free web-based service that lets users view their financial accounts on their computer screens or mobile phones. With this, they can monitor all of their transactions, even when these are made using different banks and credit cards.
It has made it possible to search for loans tailored to your needs instead of just searching through a list of generic offers
Technology has made it easier for people to seek financial help from banks or other lending agencies. For instance, peer-to-peer lending services have enabled people to borrow money from one another rather than going through a bank. By cutting down on middlemen and bureaucracy, the process is faster and more affordable.
One example of an online peer-to-peer lending service is Lending Club. Since its launch in 2007, it has granted over $20 billion worth of loans to borrowers in the US alone.
Access to worldwide credit and financial data
Technology is making it possible for banks to access credit and other financial data anywhere in the world. This has led to a growing number of banks and lenders willing to grant loans to borrowers even if they do not qualify under traditional standards. For instance, Kiva lets people lend money via their website or mobile devices to small-scale entrepreneurs around the globe.
Many online lending agencies claim that they can offer lower interest rates on loans because of the lack of overhead costs like maintaining physical branches. As a result, borrowers can also get access to cheaper financial services. This is especially helpful for people in developing countries who have limited options for borrowing money.
Although the Internet and digital transactions may have been a significant change in the world, the financial service industry still works pretty much as it did before. This can be seen in how difficult it is to get a mortgage or home loan from banks even if you provide all the necessary documentation.
Thankfully, technology plays an important role in streamlining the process of getting a mortgage or other types of loans. Digital mortgage loans allow for faster processing of housing loans. The borrower needs to comply with the documentation requirements, which are usually sent electronically. Once the lender approves the application, they can transfer funds into the customer’s account within just a few days.
Online banking means people no longer have to step out of the house
People can manage their finances from anywhere with Internet access. They no longer have to visit a bank branch in person.
Advances in technology have also enabled people to invest their money more securely and efficiently. For instance, robo-advisors like Betterment use algorithms to monitor market trends and make investment decisions based on the clients’ needs. This helps them provide personalized advice without having an overwhelming amount of information to process.
Improved view of assets and personal worth
It is cheaper and enables customers to have a better view of their assets, income, and other financial data. For instance, Mint provides users with free access to 40+ million credit cards and bank accounts in the US. This has enabled them to monitor all transactions from one location, even if they are made using different banks and credit card issuers.
In addition, users can also get a line of credit or a credit card that is useful for gaining access to cash when needed urgently.
Although some experts believe that technology has made the financial industry more efficient, others argue that it has made services too complex for some customers. For instance, many people struggle with using online and mobile banking, and some financial apps even require a college degree to use.
Nevertheless, technology will continue to play an essential role in the financial industry by giving consumers better access to data and information while making transactions smarter and faster.