By Richard McCall, the CEO of Armalytix.
In the face of the current cost of living crisis, consumers find themselves grappling with economic challenges unseen since the 2008 financial crisis. One difference from that time is the significant transformation of the personal finance landscape. That is due largely to advancements in financial technology and regulation. A blend of new technology and more traditional finance has introduced innovative tools and approaches. They can give consumers more power to navigate these challenging times effectively and bounce back faster than before. These fintech advances, including personal finance apps, Open Banking, automated services, proactive recommendations, all underpinned with a consumer-focused regulatory environment collectively present a stronger, more accessible and safer environment than was available in the wake of the 2008 crisis.
Personal Financing Apps and Open Banking Products: Revolutionising Budgeting
One bruising lesson from the 2008 financial crisis was the lack of accessible help for consumers without financial advisors with financial budgeting and management. Fast forward to today and personal financing apps have emerged as an effective answer to this. With these apps, individuals gain unparalleled visibility into their spending habits, income, and savings. Combining this data with Open Banking products allows for the tracking of transactions across various accounts. It is providing consumers with real-time insights into their financial health. This allows individuals to set budgets, track expenses and make better spending decisions.
Automation of Products and Services: Helping Smart Purchasing Decisions
Nowadays, consumers have access to automated products and services that provide tailored recommendations to optimise their financial decisions. These services extend beyond simple expense tracking to encompass more complex areas, such as product comparisons and investment or loan advice. Automated loan advisors, for instance, consider an individual’s financial situation and goals to recommend the most suitable loans.
Likewise, comparison platforms like MoneySupermarket enable consumers to explore various financial products. It is helping them to make informed choices about credit cards, loans, insurance and more.
Proactive Recommendations: AI-Enhanced Guidance
Fintech firms are making use of artificial intelligence and machine learning to proactively recommend better financial products to consumers. These AI-enabled tools analyse an individual’s financial profile and transaction history to suggest personalised products that align with their behaviours, needs and goals. This approach is markedly different from the post-2008 era when consumers had to navigate these areas independently.
Often without the knowledge of how to approach it. With proactive guidance, consumers are more likely to discover advantageous products that offer better rates, lower fees, and enhanced benefits.
Tracking Bad Spending Habits: Empowering Financial Responsibility
Modern fintech advancements have brought about increased awareness of bad spending habits. With data analytics, financial firms can track patterns of overspending, identify potential financial pitfalls and offer timely interventions. After the 2008 crisis, many individuals did not have this level of tracking and insight. They were caught off-guard by their financial vulnerabilities and incurred more debt than they could afford. Now, consumers can receive timely alerts and guidance to curb excessive spending and stand a better chance of regaining control of their finances.
Heightened Sense of Duty: Regulatory Advances and Responsibility
In response to the rise of online platforms and digital transactions, regulations surrounding financial practices have evolved significantly. A prime example of this is the gambling industry, which has undergone substantial changes to address overspending and gambling-related financial woes. Operators are now obligated to implement measures that assist individuals in managing their spending and prevent excessive losses. Similarly, recent regulatory advances, such as those introduced by the Financial Conduct Authority (FCA), have been aimed at safeguarding customer interests in the realm of Open Banking and online payments. For example, the PSD2 (Payment Services Regulations, 2017) aimed to enhance consumer protection and improve payment security, and the UK’s Open Banking initiative, launched in 2018, required banks to securely share standardised customer data, allowing consumers to have better control over their financial data.
There are many firms and products that work seamlessly with these latest regulations. They offer technology that ensures both firms and consumers can safely share the information that enables better decision-making across financial platforms and transactions. Combined, these new regulations and the technology that facilitates them help ensure that consumers are protected from potential abuses, fostering a more secure and responsible financial environment. This heightened sense of duty reflects a shift toward a more responsible financial ecosystem – one that prioritises consumer well-being.
Ultimately, the current cost of living crisis still presents an extremely challenging economic landscape for consumers. At the very least, however, the fintech evolution has better equipped them with tools and services that offer a more robust support system. As the technology and supporting regulations continue to advance, the role of fintech in empowering individuals to navigate financial challenges will only become more significant.