The FinTech industry is growing by leaps and bounds, however, the industry is still surrounded by several misconceptions among the consumers. With its revolutionary and disruptive technology, it is expected to transform the shape of our traditional financial institutions. Nevertheless, there has been a lot of speculation about this, and FinTech companies themselves have often fuelled the fire with wild stories and hype. Needless to say, there are a lot of myths out there that are required to be debunked.
#1 FinTechs are all the same
One of the most common myths amongst people is that all FinTechs are same, without any major difference between them. They are often put under a broad umbrella of financial service provider. However, if one delves deeper into the world of FinTechs, one would notice that the industry is swelling like never before with more limbs being added to it. As it is growing, there is an emergence of FinTechs of all types and sizes ranging from lending, wealth management, money transfer accounts, etc. Hence, what the industry really needs to do is to create awareness among consumers about the different facets of the Fintech industry. This awareness would help consumers to tap on a particular segment of the FinTechs as per their requirement. Not all FinTechs are built the same way and may not be able to cater all your needs. The key is to explore the industry a bit more before you settle on a specific service provider or paint all FinTechs with a broad brush.
#2 FinTechs aren’t secure
Online security is the major concern in the constantly evolving digital space and since FinTech is also a part of the same, it is also not considered secure enough by many. However, ironically, with the evolution of technologies like cloud computing, most FinTechs are well-secured when it comes to digital security, even when compared with the banks. Since most of the banks are still using legacy or archaic systems, FinTechs have an edge when it comes to modern security and reliability practices. This includes new cloud-based technology that has better encryption standards and excellent fraud detection and security standards. More people than ever are going online to make daily purchases, from buying groceries to shopping for clothes and more. There’s no reason the same convenience and security as online shopping can’t be translated into the financial world, if done the right way. Many FinTechs have been able to split the difference between making things easy and convenient while still providing security and peace of mind.
#3 Everything online is cheaper, so FinTech must be cheap too
This forms to be a huge misconception among consumers that FinTechs are ought to be cheap. However, there is no rational reason which could back this statement. Considering that it is like any other service provider, FinTech players do not and cannot offer free services all the time. In fact, at times one could find their offerings at a higher price than traditional financial providers in their segment. For instance, just at the end of August, news came that Wonga, an online personal loan company, had been shut down. Although the company started on the promise of making personal lending easy, not everything was as it seemed on the surface. It’s come to light that in many cases they over-charged their customers while not offering the same service quality as had been promised. Quality comes at a cost, and reputable FinTech companies will be transparent about what kinds of fees or taxes are involved in their services. Hence, as a consumer, one needs to be aware of their need and well researched about whom you are approaching.
#4 The FinTech industry is the end of banking
This is another common myth, and in my view, this is because of the early days of FinTechs. In their early days, companies had promised of bringing a complete transformation to the way finance sectors operate and do away with Wall Street and big banks. The half-baked stories about the FinTech industry also just lead to the confirmation of this idea. However, the truth is that FinTechs have not put an end to the banking. Rather, they have transformed the idea of banking and considering the brighter and efficient side of the FinTechs, more and more banks are willing to transform into FinTechs. Banks and traditional finance companies are fully aware that they can benefit from increased speed of innovation. FinTechs, on their part, need to find ways to emulate the stability and reliability of banks, which includes finding better funding sources and a broader and more diverse customer base. More and more we are seeing a convergence between the two worlds, we should be able to witness better service for customers.
The number of myths associated with FinTechs is humungous. However, I hope this article was able to help in debunking certain misconceptions and clear the clouds of confusion which usually hover the FinTech industry. For consumers, the best approach is to educate yourself about the broad scope of the entire FinTech industry. To be well aware, try out a couple of different FinTech services and see what actually helps you in your day-to-day life. The world of FinTechs is diverse and if one avoids the common myths like these, one can reap a lot of advantages for themselves.