Devin Partida is a prolific writer about crypto, open banking and fintech for publications like Worth, Due, Yahoo! Finance and Entrepreneur.
Few technology fields today are as disruptive as fintech. These unconventional financial apps and services have already reshaped banks, with more than half of Americans using digital banking as of 2018. Still, this is just the beginning of fintech’s potential.
Many industries are starting to adapt as new financial technologies provide an answer to long-standing problems. Here are seven sectors fintech is disrupting.
1. Payments
Perhaps fintech’s greatest disruptive potential apart from banking lies in the payment sector. This industry was one of the first to experience widespread disruption, with apps like Venmo and Cash App providing quick, easy, peer-to-peer (P2P) payments.
P2P payment apps have redefined the sector, with 79% of consumers in 2020 using some form of one. Further, these services are becoming more popular and are starting to break into the commercial space as well. More stores are accepting app-based payment, a trend that could potentially lead to them surpassing cash as credit once did.
2. Investment
A newer but quickly growing fintech application is investment apps. Stock trading was once the exclusive domain of the comparatively wealthy and those with deep knowledge of the stock market. Apps with low fees, easy-to-understand charts and fractional stock buying options have made it more accessible.
Fintech services like Robinhood and E*TRADE make it easier for users to understand and buy stocks, regardless of their experience. Improved artificial intelligence (AI) predictions can also offer reliable replacements to traditional investment advice avenues. The stock market itself will adapt as investing becomes a more widespread practice.
3. Healthcare
With its high fees and urgent demand, the health care industry is ripe for fintech-driven disruption. Lowering medical expenses isn’t easy when hospitals spend $11.9 million on surgical equipment alone, but fintech provides an answer. Moreover, these services let patients understand their bills more easily, restructure their insurance payments, find lower prices and more.
Medical billing is complicated, so startups can see impressive adoption rates by making it easier for consumers to manage. Likewise, apps that provide more insight and advice into lowering these expenses can help decrease historically high rates of medical debt.
4. Insurance
Fintech’s role in the insurance industry has seen rapid growth recently. Like medical apps, insurtech services let customers compare rates, look for ways to lower their premiums or offer cheaper, more customizable alternatives. Some even enable P2P lending as a basis for insurance.
These services may be relatively new, but they’re poised to disrupt the industry. Insurtech startups received more than $2.2 billion in funding in the first half of 2019, almost as much as all of 2018.
5. Lending
Likewise, another industry fintech is disrupting by making it more accessible is lending. Vehicle loans, payday loans and other types of B2C lending have historically had high barriers to entry and even predatory practices. Fintech alternatives improve transparency and remove traditional barriers to access.
Many fintech lending platforms use data analytics to determine creditworthiness from multiple factors, not just credit history. Some offer P2P loan services, carrying even lower fees and making them more accessible. These services could replace traditional models, as they meet the needs of people who need loans the most.
6. Financial Management
Fintech is also replacing traditional services in the financial management sector. In an industry that aims to help people save money, its transparency and ease of use are a natural fit. Like in other sectors, these alternatives typically carry lower or no fees, making them more accessible.
Some apps offer suggestions through AI trained on billions of transactions, providing accurate, quick and personalized assistance. Moreover, these algorithms will improve as they gain more data, eventually surpassing humans’ ability to predict potential outcomes. Traditional wealth management services can’t match that advantage.
7. Legal and Regulatory Work
Regulatory and legal work is another industry with considerable disrupting potential for fintech. Many companies come with stringent regulatory concerns that can carry massive costs for noncompliance. Regulatory fintech can help manage these considerations.
Regtech tools can identify potential threats to a company’s compliance earlier than a human expert, enabling faster reactions. Companies can then ensure they stay compliant with every change, avoiding related damages. These services’ speed and ease of use will become indispensable as some industry regulations grow increasingly complex.
Fintech’s Potential Is Boundless
This list is far from exhaustive. Fintech could disrupt virtually every industry, as all sectors carry unique financial considerations and obstacles. The accessibility, affordability, convenience and visibility of fintech can apply to countless operations.
These seven industries are among those seeing the most disruption from fintech services. As more users and companies become aware of these benefits, this technology will reshape entire sectors for the better.