Rising Tide Blog

Financial peace of mind? There’s an app for that

Posted by Matt Hale

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The digital native generation loves ‘disruption’. Catching an uber is cheap. Listening to music on Spotify is easy. But FinTech, and your money is a slightly different kettle of fish. That’s right: here’s our hot take on FinTech.

FinTech (Financial Technology) is the 2016s buzzword. Not a day goes by without another startup promising the world to millennials. De-centralised banking. Robo-advisers. Micro-payment apps. Plenty of new players are entering the market to challenge banks, but are they safe?

No one would turn their nose up at more personalisation in their banking. Being sent reminders for mortgage repayments? Great. Using data-crunching algorithms to work out the ideal time to make extra contributions to loans? Very snazzy. But what’s the tradeoff?

To get services like these, you will often have to hand over deeply personal information and even the keys to your internet banking. Sound sketchy? Maybe, maybe not. Some FinTech apps use powerful encryption like myprosperity to safeguard your data, but some don’t. Make sure to find out how seriously an app takes your security before you jump in.

To be honest, we’re ecstatic that young people are paying more attention to their long-term finances. It’s an uphill battle trying to convince you lot that it’s important. Reviews will tell you that the bells and whistles on these apps are great, but it’s worth hearing about some of the face-palm moments that FinTech has gone through.

There have been some shockers that have left customers in the lurch. Lending Club was the largest peer-to-peer lending app in the US market until recently (they practically invented it). The non-traditional banking format allowed plenty of people to get loans who couldn’t otherwise. It was the darling of the FinTech sector. But then the CEO quit in disgrace and the authorities started snooping around because of fudged books and possibly regulatory infringements. Here’s the rub: most FinTech apps don’t operate under complete regulatory frameworks.

Simply put, some might think it’s the Wild West and the sheriff hasn’t caught up yet!

Another pearler was Number26, a German app-only bank that advertised free ATM withdrawals. Everything was going fine until one-day hundreds of users had their accounts shut down. The reason? They had been using ATMs too often and had become a financial burden on Number26. So they were left high and dry.

Then there are Robo-advisors (which are all the rage in the States). They’re algorithms designed to transform your personal input into financial plans. But the same problem of authenticity and safety arises: how can you verify or test the plans you are being pushed into? It seems that American consumers are pretty savvy on that front: it’s estimated that 90% of people using Robo-advisors will also seek out advice from a qualified real-life human.

So give it a crack, but be careful what buttons you press.