Traditionally, the Financial Services industry has been a ‘stale’ and carefully regulated space.
For decades big banks dominated the landscape and Wall Street was the gatekeeper. If anyone wanted to do anything with their money, they had to go through one of the country’s major financial firms.
If you wanted to store your money, you opened a checking account with Bank of America. If you had plans to save for retirement, you opened a retirement account through your employer (who likely used one of a handful of major players to invest your money). Needed a loan? Major banks and credit unions were the best bet.
Today, you can still open a checking account with Bank of America, save for retirement via an employer-sponsored 401(k) plan, and get approved for a loan by the local credit union. But the days of limited options and an imbalance of power at the top of the industry are quickly fading.
Technology has taken leaps and bounds over the past decade and advances in the internet, cloud computing, IoT, AI, and big data are paving the way for an entirely new set of trends in personal finance.
The Most Interesting Trends and Shifts
There’s nothing stagnant about the financial services industry any longer.
Tectonic shifts in technology have created positive and transformational
reverberations in the world of personal finance. And the more we understand these shifts, the more informed decisions we can make around spending, saving, and investing.
Some of these trends are still in the beginning stages, while others have just reached a point where they’re experiencing mass adoption. But regardless, each is having a significant impact on the overall trajectory of the industry. Let’s dive in and take a look together:
1. Bite-Sized Investing
Fractional shares, Stocks by the Slice, Stock Slices…whatever you want to call it, bite-sized investing is a massive trend that’s exploded over the last 12-24 months. It’s a trend that was ushered in by tech companies like Robinhood, but has since been adopted by established names like Fidelity and Charles Schwab.
Here’s how it works. Traditionally, if you wanted to invest in a high-value stock, you had to buy a minimum of one share. In the case of Amazon, that would mean dropping nearly $2,800 (at the time of writing this) for a single share! And then if you wanted to invest in Google, you’d have to fork over another $1,500 for one lousy share. The problem is that not many people can do this and remain diversified.
The solution is bite-sized investing, fractional shares, or stock slices. The idea is that brokerage firms allow you to buy a portion of a stock at a fractional rate. So instead of buying a single share of Amazon at $2,800, you could invest $280 and own 10 percent of the share. Better yet, many brokerages allow you to invest as little as $1 to $5.
At first, this trend was seen as slightly gimmicky. But it’s actually one of the hottest shifts in the world of DIY investing. It’s especially appealing to the beginner investor who wants to get some skin in the game, but doesn’t have five or six figures laying around to build a portfolio.
2. Online Banks
Online banking is nothing new. The majority of Americans have used online portals to monitor their bank card transactions, transfer money, or review statements for years. But we’re quickly transitioning from a world of online banking to online banks.
It’s one thing for a physical bank to have a digital presence. It’s something else entirely for a new bank to emerge and never create a single physical branch. That’s what’s happening right now - and it’s a big trend with some serious steam behind it.
Companies like Chime have changed the game by creating no-fee checking and savings accounts with a highly functional app that lets clients control all aspects of their finances. And while their clients still get a physical Visa debit card that can be used like any other debit card from a brick and mortar bank, banks like Chime also support mobile payment platforms like Apple Pay and Google Pay for increased flexibility.
#finance #deep learning
