Fintech Risks-Few industries have been more innovative than the financial business.
Many companies routinely allow you to shop for investments, apply for loans, check credit reports and much more through electronic means. In recent years, the term “fintech” has been used to describe some of these innovations, especially those geared around smart phones.
But some fintech companies are seeking to offer services that could skirt important consumer protections, warns a new report from the National Consumer Law Center. The study sees fintech developments as part of a trend to weaken key safeguards, with the potential for more fraud, deception or other costs.
Innovation in the financial field is of prime importance to Arizona, which in 2018 became the first state to allow fintech companies to offer trial runs of their services, with less regulatory oversight, through its new “sandbox” program.
What is fintech and who is pursuing it?
There isn’t a hard definition but the term, which is short for “financial technology,” refers to a range of innovative ways for consumers to shop for loans, make payments, check credit scores and bank balances, improve investing success and so on.
While innovation long has been integral to the financial industry, the term increasingly refers to services that can be conducted on computers, smart phones and tablets, usually with no human intermediaries.
Financial companies up and down the food chain are heavily engaged in innovation and finding new ways to serve customers better and increase profits. But the fintech label mostly is applied to young, technology-driven startups rather than banking, investment and insurance giants pursuing many of the same goals.
What are some new fintech services?
The National Consumer Law Center report cited a number of fintech products and services such as new ways for lenders to evaluate credit applications and possibly enhance consumer credit scores. Others offer faster and more convenient loan applications. Some lenders enable workers to access earned wages before they have been paid, while others offer student loan refinancing.