The top three FinTech categories I follow provided insights into three themes marking the evolution of markets and money:
- The high cost of U.S. payments, especially for low-income people.
- The development of new software tools that make it easier for retail and institutional investors to reach their financial goals.
- The ongoing drama unfolding as crypto-finance transforms traditional forms of money and finance.
1. The Price of Payments
Access to financial services is the new digital divide, argues Aaron Klein, senior fellow at the Brookings Economic Studies program. Klein’s paper, “Can fintech improve health?” makes a three-part case
- People with low incomes or illiquid assets, which include cash and check payments in the digital age, pay more for digital money.
- Wealthier people with access to digital payments in the form of credit cards that build reward points get richer based on how they pay.
- Government relief payments during the covid-19 pandemic took longer and cost more for those who needed them most because they had to wait for paper checks.
In analyzing FDIC research showing that 70% of the people who use check cashers have bank accounts, Klein notes that banks take two-to-six days to provide available funds from a paper check. “Check cashers by contract give consumers immediate access to those funds.”
When a consumer has to buy groceries or pay for immediate health-care needs, the high check-cashing fee is a rational economic decision.
“I dream of the day when a member of Congress or a regulator has to pay those fees,” Klien said. The paper is rich with original research and analysis. Download the research paper here: https://www.brookings.edu/research/can-fintech-improve-health/
2. Software Solutions
Most investors fail. Most of today’s new retail investors lose money. Many institutional investors spend too much time and money managing data. Companies presenting in the FinTech Theater at the Morningstar Investment Conference US feature software and apps that provide:
- User interfaces that make it easier for retail and institutional investors to trade and research.
- Analytical features that give greater insight into the mass of financial data available today so investors can improve returns.
- Tools that provide the raw data to data scientists so they can build sophisticated models for data scientists more quickly and without major software development projects.
“We have a duty to support investors with high-quality data and content so that they can reach their investment goals,” said Jan Szilagyi, CEO, Toggle, a data-analytics application.
3. Crypto Crimp
U.S. regulators continue to freak out over the crypto risks, and crypto firms are seeking lobbyists to help. Regulators in China, however, took decisive action and declared all crypto activity illegal. Crypto prices tumbled, leaving opportunities for investors kicking themselves for not buying on the last downcycle.