After a few hours of browsing various personal finance topics online it’s possible you’ve encountered an interesting new term:
No, fintech isn’t the name of the company Peter Gibbons worked for in the movie Office Space, but it does sound just as bland. And it’s changing nearly everything about how people interact with money.
To begin, fintech is short for Financial Technology – online banking, apps like Mint and Personal Capital, web based investing platforms, payment and money transferring apps – basically any app or website that provides a financial service to it’s users falls under the realm of fintech.
At this point you’re probably wondering if this is something you really need to know, or if it’s just an interesting topic to finance nerds like me. My selling point is that fintech is changing the way people interact with money – in ways both good and bad – and as a reader of a personal finance blog (thus someone interested in bettering their financial situation) it benefits you to know what’s going on in this arena and how it can impact you.
A Day in the (Fintech) Life
It’s payday, so I open up my bank app to make sure my paycheck direct deposited. I also check any pending transfers and automatic transactions. Then I sent rent money to my girlfriend via Square Cash or Venmo – she’s the only one who still has paper checks.
After that I make a credit card payment and check back to make sure my automatic student loan payment won’t overdraw my account (I get an interest rate deduction for automatic payments). Next I log in to Personal Capital to check my Net Worth – it’s updated automatically, and all my old 401k’s and savings accounts are in one place.
I notice I “saved” $23.18 this month with Digit, which automatically rounds up the total on debit card transactions and transfers the excess into a savings account. I look at my spending for the last two weeks and see that spending on restaurants has gotten a little out of hand, so I resolve to cook more. Finally, I log into Betterment and up my contribution a percent or two. I figure forcing myself to invest more will help with the restaurant problem.
While the above story is pretty detailed (and somewhat exaggerated), hopefully it makes you take a second and think about your own “payday” process.
Finance Yo Self With: Fintech
When typing out the above scenario, one thing struck me as interesting – despite seeming like less work, there were still a lot of transactions happening and things I had to do. I was still “managing my money”, despite some automation.
The physical aspect of managing money now just involves a series of swipes, either on a smartphone or of a debit card. But it’s still physical.
That said, in my story I could just as easily have checked my direct deposit, ignored the automatic student loan payment, and gone out shopping because I could see the money right there.
So fintech can’t solve all your financial problems, but it can make it easier for you to solve them.
It can also make things way more complicated than they have to be. It’s easier than ever to keep up with multiple accounts, which means it’s also easier than ever to have multiple accounts scattered all over the place. Briefly ignoring the fact that you can day trade on the internet, even regular investors can get caught up in being able to see their balances every day and make rash decisions. And a lot has been written about how we spend money differently when using cash vs. electronic payments or cards.
For all it’s benefits (and faults), I still think having an idea of what Fintech is is important to everyone who wants to manage their money better.
There’s a lot of apps and tools that you can waste your time (and money) on. But there’s also a lot of really helpful resources out there. And financing yo self is all about finding what works for you when you manage your finances. There’s some trial and error in that, and I think most people find the experimentation fun.
Whatever your financial situation or goal is, there’s probably an app for that (remember that!?). Just keep in mind who’s still doing the swiping.