By Richard McCall, the CEO of Armalytix.
Dealing with economic challenges like the current cost of living crisis has become a pressing issue for consumers. The personal finance landscape has undergone significant changes, largely due to advancements in financial technology and regulation. The fusion of novel technology and conventional finance has introduced innovative tools and approaches that empower consumers to navigate these challenging times effectively and bounce back faster than before. These fintech advances, such as personal finance apps, Open Banking, automated services, and proactive recommendations, supported by a consumer-focused regulatory environment, collectively present a stronger, more accessible, and safer environment than was available in the wake of the 2008 crisis.
Revolutionising Budgeting with Personal Financing Apps and Open Banking Products
The emergence of personal financing apps now provides individuals with unparalleled visibility into their spending habits, income, and savings. When combined with Open Banking products, users can track transactions across various accounts, gaining real-time insights into their financial health. This enables individuals to establish budgets, monitor expenses, and make better spending decisions.
Helping Smart Purchasing Decisions through Automation of Products and Services
Consumers now have access to automated products and services that offer tailored recommendations to optimize their financial decisions. These services go beyond simple expense tracking to include 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.
Comparison platforms like MoneySupermarket enable consumers to explore various financial products, helping them make informed choices about credit cards, loans, insurance, and more.
AI-Enhanced Guidance with Proactive Recommendations
Fintech firms are utilizing artificial intelligence and machine learning to proactively recommend better financial products to consumers, based on their financial profile and transaction history. This personalized approach is a marked departure from the post-2008 era when consumers had to navigate these areas independently.
Proactive guidance enables consumers to discover advantageous products offering better rates, lower fees, and enhanced benefits.
Empowering Financial Responsibility by Tracking Bad Spending Habits
Fintech advancements have led to increased awareness of bad spending habits, allowing financial firms to track patterns of overspending, identify potential financial pitfalls, and offer timely interventions. This level of tracking and insight was not available post-2008 crisis, and consumers 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, standing a better chance of regaining control of their finances.
Regulatory Advances and Responsibility for a Heightened Sense of Duty
The rise of online platforms and digital transactions has driven significant evolution in financial regulations. For example, the gambling industry has undergone substantial changes to address overspending and gambling-related financial issues, with operators now obligated to implement measures that assist individuals in managing their spending and prevent excessive losses. Recent regulatory advances, such as those introduced by the Financial Conduct Authority (FCA), have aimed at safeguarding customer interests in the realm of Open Banking and online payments. For instance, the PSD2 (Payment Services Regulations, 2017) sought to enhance consumer protection and improve payment security, while the UK’s Open Banking initiative required banks to securely share standardised customer data, allowing consumers to have better control over their financial data.
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 is reflective of a shift toward a more responsible financial ecosystem that prioritizes consumer well-being.
While the current cost of living crisis presents an extremely challenging economic landscape for consumers, the fintech evolution has better equipped them with tools and services that offer a more robust support system. As technology and supporting regulations continue to advance, the role of fintech in empowering individuals to navigate financial challenges will only become more significant.
