How Fintech Will Disrupt the Banking System

October 3rd, 2016 by

The impact of new technologies on the financial markets is finally being noted in the media. The potential for sea change is simply too realistic to ignore. An entire industry is emerging around the development of financial technology, or fintech.


Source: Pixabay

In the same way that high-frequency trading and digital currencies are transforming the world of trading securities, the way that banking is conducted is likely to be revolutionized by the emergence of fintech.

Rapid Change

chip-and-pin-credit-cardIn the space of just a few short years, we’ve seen new credit card chips make their debut, online banking become ubiquitous, and a rising interest in alternative forms of saving among the general public. These are all manifestations of useful fintech, or are at least ripe for its application. Beyond the changes being made by big businesses, these are simple examples of how consumers are driving technology-based changes in banking.

Below, we’ll take a look at a few key areas where fintech is already having a profound impact on how everyday people relate to banking institutions.

Decentralized Capital

This is probably the most sprawling and diverse application of fintech. It’s also one that’s mainly focused on consumers (rather than service providers) but still threatens to upend how banking institutions carry out business.

Backlit keyboard

Source: User:Colin / Wikimedia Commons / CC BY-SA 4.0

Bitcoin and e-Wallets are allowing people to conduct transactions through an alternative payment system. Even PayPal, Skrill, and similar services are part of this shift. Peer-to-peer (P2P) payment alternatives cut out the middleman in transactions (at least on the micro scale), which could change the entire credit card and money transfer industries. Similarly, crowdfunding through sites like Kickstarter and GoFundMe has allowed individuals and start-ups to circumvent traditional forms of lending and banking services.

robot advisor fintech


More and more, investors are relying on robots and automated platforms to handle their investments. These “robo-advisors” can automatically rebalance your portfolio without the time and cost of consulting with an actual person. Retail investors who may not have time to closely manage their portfolio with an advisor can take advantage of the convenience and depersonalized experience of a robo-advisor. Their popularity has forced bigger industry players like Vanguard and Charles Schwab to offer their own similar platforms.

Electronic Options

Red tape. Source: Flickr

Perhaps the simplest advantage that fintech can offer is cutting down on the need for paperwork and red tape, which often confuses and deters consumers. E-banking, online banking services, and mobile banking make it easy for people to deposit checks or manage their bank accounts from anywhere. We’re far beyond the point where you could trade securities from a computer; now you can get approved for a loan or a mortgage right from your laptop.

While all of these emerging technologies indeed make banking more convenient and more accessible, it actually makes holding physical gold as an insurance policy even more imperative. The transition is unlikely to be smooth and without backlash. As the normal model of banking is challenged, things will become more unpredictable. Just look at how volatile Bitcoin has been in a few short years. As this upheaval in banking and finance unfolds, you will need to have a reliable store of wealth to hedge against the unknown.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

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