Ten years is a long time in technology years. Ten years ago, the smartphone had just come into being. Ten years before that, the internet had just been born (as far as being accessible to the public, anyway). And now here we sit, in 2020 – entering a new decade and with a world vastly changed from the one twenty years before. Fintech, the name aptly given to the combination of finance and technology, has provided convenient solutions to legacy products that promise to continue developing into the future. Let’s take a look at some of the top solutions that changed the face of finance in the last decade and those that are moving us forward into the next.
The advent of PayPal was a gamechanger for the world of payments. Along with WorldPay, these fintech pioneers utilized the unprecedented access provided by the internet to connect consumers, merchants, and friends and family in a way that was more efficient, more seamless, and more secure than ever before. Making payments as easy as entering an email address, the ease of use and user-friendly experience demonstrated by the first digital payment systems paved the way for today’s mobile payment apps. Over 480 million users employ the convenience of mobile wallets through Venmo, Samsung, Google, and Apple Pay, while over two million merchants support the virtually instant payments through their services. Likewise, for merchants – and small businesses in particular – another solution has emerged from the payments evolution. Stripe, accepted internationally, and Square have created an avenue through which small business owners can seamlessly accept credit cards at any location. Functioning easily as either a terminal or a phone attachment, Stripe and Square have revolutionized the ability of merchants to expand their payment options, making offering customers’ preferred method of payment both accessible and affordable.
Peer-to-peer (P2P) lending offered new solutions after 2008 when loans from big banks became less available. Growing to an over $200 billion market, P2P lending is one of the fastest growing segments of fintech, with lower operating costs than traditional banks in addition to extensive data-driven models for assessing credibility. Platforms like Lending Club, Funding Circle, and SoFi have provided new opportunities for individuals in addition to other small and medium-sized enterprises (SMEs). They have also attracted the attention of legacy institutions as well as big tech, with Goldman Sachs and Amazon both entering the P2P arena. Offering opportunities for those who may have been rejected by traditional lenders, crowdfunding – through platforms such as Kickstarter, GoFundMe, and Patreon – have given entrepreneurs, artists, and more the alternative of achieving funding by reaching out directly to their potential consumers and audiences. Projected to double in market size by 2022, alternative lending sources are used by millions across the globe.
Micropayments are any sums that are small in total, with many being less than one dollar. Previously prohibitively expensive to send, today micropayments are used in gaming and online content creation, as well as make up a large portion of payments sent for everyday costs – such as money for school fees or electricity bills – across a large portion of the globe. Developments in fintech have provided an affordable alternative to traditional money transfer services as well as created an entirely new system for those interacting online, and micropayments today total in the hundreds of billions. Websites like XE and TransferWise provide the growing remittance market with the ability to send money for fees that are small or nonexistent. The introduction of crypto, meanwhile, has also revolutionized the micropayments landscape. Providing access to a payment system with virtually no barriers to entry, such as complicated account opening procedures, cryptocurrencies allow for micropayments and other remittances to be sent directly to the receiver without any third party involvement. Through the use of blockchain technology, fees for sending crypto can vary from a few cents to zero, and the transactions are often instant. Crypto also facilitated a system for “microtipping,” or sending micropayments to content creators or others online. The browser extension Tippin.me, popularized by Twitter CEO Jack Dorsey, allowed Twitter users to send tips to support other users like journalists and entrepreneurs. The browser Brave, meanwhile, promises to revolutionize advertising by offering micropayments in exchange for viewing ads.
A unique combination of messaging app and payment app, in-app payments like those in China’s WeChat have yet to be seen in the U.S. However, it’s likely that this type of hybrid platform – often referred to as a “super app” – will make its way into other countries in the (possibly near) future. With a monthly user base of a billion people, WeChat combines the functionality of a social platform, payment system, and even ride-hailing and hotel-booking app all in one. Due to its integration, sending payments to friends and family or splitting a bill at a restaurant is as easy as clicking on a contact. Speculation has abounded regarding rumors that the Facebook-owned WhatsApp, a global messaging app with over a billion users, would be incorporating similar in-app payments. Most recently, however, Facebook has announced its intention to create its own in-app currency, Libra, that would allow Facebook and Messenger users to transfer money to one another as seamlessly as WeChat does in China. Facebook likewise tested a Messenger-based appointment-booking system in April of 2019. As more of people’s lives move online, particularly through smartphones, apps that function as their own ecosystem, incorporating multiple aspects of daily life into one seamless system, are increasing in popularity. WeChat recently opened access to tourists, allowing foreign credit cards to be used through the system, and Facebook – the most downloaded app of all time on iOS – with its ambitions to bring Libra to its users, is working to likewise upgrade the role that social media plays in payments.
Finance and technology are likely to continue becoming more fully integrated as we move forward into the next decade. As tech leaps forward again with virtual reality, artificial intelligence, and cryptocurrency, the next ten years of finance will likely look even more vastly different than the last.