Effective wealth-building strategies keep continually changing from year to year depending on the prevailing economic conditions, and so does the investment products on offer. Considering the current market condition, saving a percentage of income will not suffice investors to achieve the desired returns they’re seeking.
The traditional approach of parking money in savings accounts with a bank may not appear to be that remunerative, considering the low-interest rates. In fact, shrewd investors are increasingly switching to alternative offerings to earn lucrative returns. Hence, traditional banking has taken a backseat as investors are preferring alternative investments.
The historic low-interest rates have been the driving factors behind investors looking for alternative investments.
While borrowing, low rates are the stumbling blocks for investors seeking to grow their money, as keeping the savings in a dedicated account can deprive its value during inflation. Unlike, traditional brick-and-mortar banks, online-only accounts offer slightly better returns as they have lower overheads.
Deteriorating Trust In Traditional Players
Post the global financial crisis, distrust in the banks will continue. Since 2008, fintech players have capitalised and increasingly gained the trust of consumers, who have moved away from traditional banks leading to the rise of alternative investments. Consecutively, borrowers are increasingly turning away from the big banks for more competitive rates due to distrust.
The Rise Of Attractive Fintech Alternatives
Factors like low-interest rates have eventually led to the rise of convenient, fast, and cost-effective fintech alternatives. Banks even to this day, offer consumers assurance on the deposited money, however, the high returns offered by alternatives lure investors.
It’s this opportunity and environment that fintech has risen to challenge the status quo in the form of peer-to-peer (P2P) lending, which eliminates banks by enabling investors to lend and borrowers directly.
A Look Into The Future
The financial sector has undergone a rapid transformation in the last 10 years — with the introduction of cryptocurrencies like bitcoin, blockchain technology, P2P lending, big data, machine learning, artificial intelligence, online payments, neo banks, and more.
In a short span of time, fintech has cautiously yet beneficially revamped the entire financial ecosystem with customised solutions and is expected to dive deep in short-term investment solutions and target customer requirements. Fintech startups are changing the banking ecosystem by scaling up customer service while diversifying investor portfolios and churning comparatively high returns.
This year will see further evolution in complex B2B payments powered by cloud computing and AI becoming the new normal with uber-fast P2P solutions by technology giants, modernising payment facilities framed as per customer intelligence, improved fluidity, and ease of transactions.
In 2020, Fintech startups have the opportunity to disrupt the legacy systems in the financial space with a more integrated approach targeting everyone including the grassroots and empowering them to partake in the fintech leaps in our economy.