Financial technology, nicknamed “FinTech,” is a buzzword term that was all the rage and in vogue for several years, but is now beginning to slow. Fintech refers to software for financial services. While it previously referred to back-end banking and brokerage services, fintech now includes consumer-side applications for online loans, mobile apps, cryptocurrencies and blockchain, online shopping, fundraising, investment robo-advisers, personal money management, and more. Fintech can also include behavioral analytics, artificial intelligence, data mining, and adaptive learning to make decisions.
Many fintech tools allow people to manage their personal finances easier and possibly create disruptive business models. Fintech platforms and tools attempt to add convenience, speed, and agility in the marketplace. Unfortunately, like any growing fad, there is a downside.
- Breaches of personal information:
- For the last few years, hundreds of millions of financial records were leaked
- Financial firms are most attacked by hackers
- In spite of security protocols, half of financial leaks are from human error
- Last week, the Obamacare website leaked the personal date of 75,000 people
- Lowering lending standards:
- A new FICO score called Ultra-FICO (coming out in 2019) reduces the formula weighting from your past history of missed payments, increasing your probability of getting a loan
- Online lenders offering tiny loans at high rates
- Lending platforms for people and businesses unable to get standard bank loans
- Regular companies adding “fintech” to their name:
- One self-proclaimed “thought-leader in fintech” just has a regular equipment leasing company
- Fintech stock broker, Robinhood offes “free” stock trades,” but they simply hide their real cost
- One scammer took control of a tiny biotech public company. He fraudulently renamed it to “Riot Blockchain,” and the stock price exploded. The SEC is investigating him for running a “Pump & Dump” scam and illegal insider trading.
- Zillions of failed startups trying to catch the tidal wave of investment money flooding into fintech
$15 billion may be invested in fintech this year, and many are trying to grab a piece of it. There are all manner of ridiculous ideas that are already in the graveyard: trying to match social networking with your money; offering tiny credits to use a loan platform; pre-revenue business ideas; not understanding compliance (banking and finance are two of the most regulated industries); no prospectus – just a 2-minute animation video; and dozens of new brokerages that were going to “turn the industry on their head,” that ended up being sold for pennies to the big players.