Kerim Derhalli, CEO and Founder of invstr, a social network and app that delivers financial information to your smartphone, discusses the impact of fintech over the next five years, the importance of financial literacy and how fintech can be used to empower consumers to make smarter financial decisions.
The digital revolution and technological advancements in the past decade have redefined a number of industries, and fintech looks sets to do the same to the traditional banking and financial sector, empowering people to make their own choices about how they manage their finances.
How has fintech evolved and changed over the years?
Fintech is still in its infancy. The finance industry has $5trn in annual revenues and is the second largest industry in the world. Fintech revenues are tiny by comparison. Most of the focus to date has been on payments and money transfer. In the past year, we have seen services available from the fintech sector begin to mirror the breadth offered by traditional banks and financial services companies more and more, and that looks set to continue in the months and years to come.
What’s next for fintech? Where do you believe the biggest growth areas to be over the next ten years?
How do you see fintech continue to disrupt traditional banking?
Every single part of banking will be disrupted – deposit taking, lending, money transfer, execution, research, fiduciary, risk taking & intermediation, advisory. ‘Fintechies’ will prove more adept at advancing the consumer’s approach to managing their finances, and businesses will also find their offers progressively more attractive. The finance industry as a whole will become a more competitive sphere, which will be of benefit to all, other than those offering a strong enough service to survive.
How is fintech making it easier for consumers to access a broader range of financial services?
Right now it is having little impact. There are too many single product initiatives that are sub scale, and they aren’t being adopted by a large enough community to prove tried and tested. Once single services or fintech providers with a range of services reach a critical mass of consumers who both use and trust their products, this is when fintech innovation will grow exponentially.
Is traditional banking catching up to the innovations in fintech at all?
In short, no. Banks suffer from trust issues, and are burdened with legacy technology that is too aged to enable innovation, but that is also too complex to replace. There will need to be a sea change in the banking establishments business models and modus operandi for them to keep pace with nimble and sharp fintech businesses.
Are there not significant risks associated for people using fintech companies rather than traditional providers of financial service?
This very much depends on the service - to the extent that fintech facilitates peer-to-peer transactions, where the intermediary risk goes away completely. Also, the regulators are catching up – the FCA has launched a “regulatory sandbox” and shows a desire to engage with the sector meaningfully.
You’ve recently conducted research into the financial understanding of millennials – can you outline the findings and what this means for fintech?
According to the survey, millennials across the UK are apprehensive about their ability to manage their own finances with more than 68 per cent of respondents stating that they were worried about their financial future, and either wanted to do something about it or didn’t know what to do about it.
As a generation of digital natives often cited as having a better education than their predecessors, the survey revealed that although millennials are worried about their financial future (or consider that investing is important), their knowledge of finance is very limited, with 57 per cent trusting their friends and family for financial advice against only 46 per cent trusting professional advisors.
Fintech is innovating already to combat the issues the younger generation finds with dealing with its financial situation. It is enabling a whole generation to manage money in the way they want to, rather than being constrained by what has gone before.
You have recently re-launched your app to place a greater focus on millennials. How will this help to improve their financial literacy?
We provide unprecedented access to information for free. We make finance and investment easy to understand. We make it fun and social to learn about the financial markets. There is a huge education piece to be done, and this is the driving force behind invstr – we want to make financial information freely available to everybody, so that people can take charge of their own personal finances, and make smarter choices.
Image source: Shutterstock/StockPhotoAstur
Kerim Derhalli, CEO and founder of invstr