Fintech Firms Shaking Up the Financial Sector
Fintech is in vogue. But what exactly does this term mean and how can individual investors benefit? Apart from investment opportunities, the applications for trading are especially worth considering.
Fintech companies are reshaping the financial market. They use mobile payment solutions and their own trading platforms to offer modern applications for the digital generation. New fintech startups are popping up all over Silicon Valley and are causing upheaval in the financial sector.
Fintech is also becoming increasingly important in Switzerland, thanks in part to Swiss FinTech Innovations, an independent association of Swiss financial institutions, universities, and organizations. The aim of this association is to position Switzerland as the global market leader in digitalization and innovation in the financial industry and as the world's top center for fintech.
Banks Benefit from Fintech Expertise
Established financial institutions have long understood that they cannot buck this trend, so they are getting involved in fintech startups. Instead of viewing them as competitors, they hope to partner with them as “Frenemies” and benefit from their innovations. There is an exchange of expertise from both sides.
For example, Credit Suisse is active in Silicon Valley and has established Credit Suisse Labs for this purpose. This innovative platform develops and tests new ideas. “By collaborating with innovative fintech startups, we hope to actively help shape the development of complementary and disruptive technologies," says Lucia Waldner, Head of the Credit Suisse Research Institute and Director of International Affairs and Innovation.
Private Investors Can Invest in Fintechs Listed on the Stock Exchange
It's not just banks that benefit from the innovative strength of fintechs. Investors can also take part in this boom. Some fintech firms are already listed on the stock exchange. Investors can buy shares in these promising companies and hope for rising market prices. But, due to the risk, only qualified investors can invest in fintech startups through crowdfunding or private equity funds.
"But it should be noted, however, that these startups are often at a very early stage of development," advises Ms. Waldner as a warning against investing too soon. "The sector is is fraught with large risks and unpredictable returns." In the long-term, she sees it as an attractive sector from an investor standpoint. "I think the most promising startups are the ones that established banks can acquire as clients."
Fintechs Offer Exciting Solutions for Everyday Life
Private individuals benefit more directly from the new services that fintechs offer in their everyday lives. Payment apps have already become indispensable. In addition, there are apps for personal budgeting and asset analysis, and of course virtual currencies such as bitcoins. They make it easier for you to keep an eye on your assets and quickly make use of financial services.
Besides crowdfunding, social trading and trading platforms are also of interest. They open up new markets where money can be invested. With social trading, investors can be influenced by others and invest in products assembled by other traders. The expertise of these traders ranges from amateur to professional.
Robo-Advisors Enhance Future Investment Advisory Services
"Robo-advisors" are also becoming increasingly important in the financial sector. They use algorithms and massive background databases to analyze portfolios. They work 24 hours per day and do so much more affordably than a human. In the future, it will be possible to provide these robots with automatically-generated and customized investment proposals, thus making investing even more innovative.
Similar apps that use these technologies already exist today. It is likely that such solutions will soon be offered not only by fintech providers, but also by established banks. Professor Dr. Rainer Alt, a business systems engineer at Leipzig University, is convinced that "Robo-advice solutions will increasingly supplement existing banking advice." This means that investing via online trading and apps will be as commonplace in a few years as paying online is today. Yet, private banking research shows that personal interaction with a relationship manager is still important – and will become even more so in the future.