Faster, better, cheaper: how fintech companies are giving power to the people

There are a number of exciting tech upstarts in the world of finance, but how do companies such as TransferWise change the lives of their users?

From overseas payments and wealth management, to loans and crowdfunding, the fintech revolution is edging ever closer to mainstream.

Often defined as challenger brands, fintech (financial technology) companies are encroaching on market share held long held by the banks by creating faster, better, cheaper products, designed with the customer in mind.

However, this shift in dynamics is not quite as simple as “disrupting” a traditionally sluggish financial system. The businesses and individuals at the heart of the sector are also challenging the mentalities underpinning it, says Harriet Allner a member of PHA Media’s strategic communications team, with a special focus on fintech.

She says: “While companies such as Nutmeg provide a fairer, more accessible investment platform, what is more interesting is their emphasis on transparency and inclusivity in an industry usually reserved for the wealthy. Their approach turns away from the corporate mentality, placing consumers at the heart and offering new choice to the market.”

Similarly, in the remittance industry, peer-to-peer money transfer service TransferWise has accentuated the role of the “global village”, moving away from business-to-consumer interactions and into human-to-human relationships.

Chief executive and co-founder Taavet Hinrikus says: “Banking has been unfair for decades. With a monopoly on financial services, high-street banks have been able to overcharge and under-serve consumers. To make it worse, there’s a complete lack of transparency in the sector.

“When it comes to sending money abroad, Brits lose millions of pounds every year in a hidden exchange-rate mark-up. Because the pricing model is so non-transparent many people won’t even realise they’ve been overcharged. It’s a problem that affects everyone from students at universities abroad to pensioners who have retired overseas.”

Peer-to-peer lending service Zopa connects borrowers and lenders directly making the transaction more efficient and eliminating the need for expensive overheads.

Executive chairman and co-founder Giles Andrews says: “This reduces costs for everyone, leading to better value for both our borrowers and investors. By using the latest technology, fintech firms can evolve their offering faster, react to customer feedback sooner and they are not tied to legacy systems that can limit innovation. In effect we are resetting customer expectations of experience and value they will get from a financial services firm.”

With traditional banking services coming under attack from new models of finance that use technology to offer simpler, cheaper, faster products, the fintech space is becoming crowded. There are some clear leaders; TransferWise in international money transfers, Klarna in payments, and MarketInvoice in invoice finance. But the marketplace is becoming increasingly fragmented. Do customers want to have 20 different providers of financial services?

“That seems unlikely,” says Anil Stocker co-founder and chief executive of MarketInvoice. “Digital banks will most likely try and bring these improved products under one brand making it easier for consumers. But how they do that and whether they’ll succeed is unclear.”

But Andrews disagrees. He says: “We expect more customers to move away from relying on a single bank for their personal finance services, to having a suite of specialist providers who offer the best value in the service they offer, whether this is current accounts, loans, lending, money transfers or investments.”

It is an interesting shift in dynamics. As Allner points out, they may not be not market leaders, but many fintech challengers are taking ownership of their underdog status, creating narratives with which people are increasingly engaged and linking themselves with social causes and global agendas.

“This is turning them into powerful thought leaders driving innovation, forcing incumbents to cut costs and improve services, and reshaping finance for the better,” she adds.

TransferWise’s Hinrikus also believes the world of finance is changing for the better. He says: “Our research shows that two-thirds of UK consumers are open to using tech providers for financial services today, and in five years a quarter of people expect to use tech providers for at least half their financial needs.”

Visit www.transferwise.com for more information