6 Ways FinTech Will Improve Your Financial Life
More than 10,000 payments executives, engineers, and entrepreneurs gathered in Las Vegas this week to attend Money 20/20, the massive fintech event connecting financial services and payments innovation with mobile, retail, marketing, data and technology. Although I was unable to attend the conference this year, I followed some transformative financial developments via social media and video news reports.
Amid demos and keynotes, Richard Cordray, director of Consumer Financial Protection Bureau, appeared at the event to discuss—as expected—the need for industry oversight, but also share how fintech is reshaping financial lives.
“The possibilities opened up by powerful technologies and novel approaches are enabling new services and transforming how payments and lending are conducted. So we want to understand how we can influence and channel this wave in positive directions,” he said, citing that the federal agency has handled more than 1 million consumer complaints, using tech to make such information available and design web-based tools to help individuals make better financial choices.
His Money 20/20 appearance coincided with the CFPB’s release of its initial Project Catalyst report on market developments from established financial institutions and fintech startups. As such, it also provided an overview of Project Catalyst’s “work to promote consumer-friendly innovation” and the need to ensure consumer protections are “built into emerging products and services from the outset.”
Cordray shared that among the top priorities of the four-year-old initiative has been close engagement with hundreds of companies, entrepreneurs, and other fintech innovators through its Office Hours program “to better understand emerging market innovations, what does and does not work for consumers, and potential challenges facing innovators.”
The agency released the following findings on how fintech companies can improve the financial lives of consumers like you:
1. Expand access to credit:
The CFPB estimates that roughly 45 million Americans have either no credit history or one that is either too scarce or too stale to merit a score. Project Catalyst has learned of a number of innovators seek to facilitate “responsible access to credit” by exploring options such as accessing alternative forms of data and analysis to determine a given applicant’s creditworthiness. Moreover, it has identified fintech firms developing tools to improve consumer engagement related to addressing accuracy and clarity issues in credit reporting.
2. Provide safe financial recordkeeping:
Project Catalyst has discovered innovative tools to help families “better manage their finances and weather financial shocks.” These tools, however, require them to allow companies to access their financial records, typically stored at various financial services institutions. CFPB officials have been concerned by reports that some institutions try to limit or shut off access rather than explore ways to make the process safe and secure.
3. Support savings:
Some companies offer services designed to help individuals build emergency savings by determining how much they can afford to save based on income and expenses and then automating their savings choices. Others have developed apps that enable consumers to automatically transfer money to savings accounts.
4. Improve cash-flow management:
According to Project Catalyst, some fintech companies are developing innovations to help address the time lag in cash flow tied to income and expenses. Eliminating such challenges helps consumers avoid incurring bank overdraft fees and other expenses. Through some automated services, workers can gain access to accrued wages before payday while other vehicles deduct a portion of employee paychecks to facilitate timely payments of recurring bills.
5. Increase student loan refinancing options:
In 2013, the CFPB reported on the fact that the lack of student loan refinancing options locked consumers into higher rates. Since that time, Project Catalyst has found fintech companies that offer borrowers with exorbitant student loan debt the ability to take advantage of the current low-interest rate environment.
6. Update mortgage servicing platforms:
Project Catalyst identified firms that are working on how “to adopt or build more modern technology platforms to improve loan servicing and make them more flexible and user-friendly. Others are looking at machine learning to detect early on when borrowers are likely to suffer financial distress in order to take steps to reduce defaults.