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What is Fintech? It could be the future of banking and everything

Fintech is the latest trend in financial services that let people jump on crowd-sourced investments, the chance to refinance or borrow, make purchases and more.
Fintech is the latest trend in financial services that let people jump on crowd-sourced investments, the chance to refinance or borrow, make purchases and more.

When was the last time you went into a brick-and-mortar bank?

Daniel Newman, a contributor to Forbes magazine, claims that 40 percent of Americans did not physically enter a bank or credit union in the first half of 2017.

But this trend doesn’t necessarily mean that customers are using only online or mobile banking. Instead, many use what Newman calls “financial wellness platforms,” offering other financial services that are not through traditional banks. This translates into Fintech, a bundle of emerging financial service technologies, such as digital wallets and robo advisers, that allow consumers to borrow money, pay bills and invest from a mobile phone.

While mobile banking and financial transactions are becoming standard operating procedures for many customers, one country is forging further ahead with more tech-savvy financial and business practices.

Estonia, a country of 1.3 million people, is one-fourth the size of Idaho. Small but feisty, it sits across the Baltic Sea from Finland. The home base of Skype, the app that allows free international calling on desktop and mobile devises, Estonia was hard-hit by the 2008 financial crisis. That spurred its government to build a new economy that can tackle the future with gusto. It started with building a tech-savvy citizenry; for example, children in Estonia start to learn coding in kindergarten.

Estonia also is home to one of the most integrated data access systems in the world. Jurica Dujmovic, a columnist for MarketWatch.com, calls Estonia the most technically advanced country in the world. Dujmovic reports that Estonians are able to vote, do their financial transactions and complete tax returns, all online, using X-Road, a system that links public and private databases throughout the country. Apparently, 99 percent of all state services are now online.

These services are not just limited to Estonians, but are available as well to “e-residents.” Estonian e-Residency is a “digital transnational identity” program. An Estonian e-resident receives a smart ID card that is equivalent to having a handwritten signature or face identification. Then, an e-resident can register a new company in Estonia (in a day) and carry out multiple business and financial related activities.

I suppose not going into a bank will soon be replaced by not even going into the country where you conduct transactions.

Nancy Napier is a distinguished professor at Boise State University; nnapier@boisestate.edu.

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