Diminishing trust in financial institutions will lead to a significant increase in the use of fintech firms for products and services such as loans and investment management, a new report from the U.K.-based, peer-to-peer international money transfer platform provider TransferWise said.
Nearly one third of Americans will use a technology company for most of their financial services within five years, according to the report, "The Future of Finance."
"The world of finance is about to change – for good and for the better," Taavet Hinrikus, CEO and co-founder of TransferWise, said. "In five years' time, the financial services sector will look completely different with a host of new providers and innovative new services. In ten years, it will be transformed. The main shift will be in our expectations and behavior as consumers. Most of us are now happy to use alternatives to banks for more and more of our financial needs."
In five years, Hinrikus added, non-bank financial service providers will almost universally control some parts of the sector.
"The most important result will be the true democratization of finance," he said. "The nature of the current 'bundled' model of banking is fundamentally unfair. But this is changing – and the consumer will benefit."
Trust is a key driver in the rise of fintech, according to TransferWise, and changes to how Americans manage their money are likely coming in the next decade. More than half of American adults believe that technology providers are more secure or as secure as banks, while only 30% believed they were less secure, the report said. In addition, more than 75% of Americans said in 10 years, they would trust a technology company with at least some of their financial services needs.
Other report findings revealed that by 2020, more than one in 10 Americans anticipates using a technology company for a loan and 6% expect to use a technology company or robo-adviser to manage investments. In addition, almost one in 10 said they expect to use a fintech company for their mortgage by 2020.
Forty-four percent of those surveyed also expect a fintech company to provide some of their financial needs by 2020. The shift may be most dramatic in the area of credit cards, where 31% expect to be using a technology company within five years.
"The current disruptors are challenging the incumbents by introducing greater transparency – some do this out of a sense of fairness but it was also a necessity in order to compete. That transparency brings greater freedom and greater choice for the consumer: The possibility of a different future," the report, which was based on a survey of more than 9,000 adults, said.
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Roy Urrico
Roy W. Urrico specializes in articles about financial technology and services for Credit Union Times, as well as ghostwriting, copywriting, and case studies. Also: writer/editor of a semi-annual newsletter for Association for Financial Technology since 1997 and history projects funded by the U.S Interior Department, National Park Service and Warren County (N.Y.).
