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Opinion

Disrupting how people buy and manage their personal finances

Fintech can empower consumers to make rational decisions on their personal finances, writes Jussi Valsta.

People are familiar with comparing flights and other easy-to-understand products and services. We like making informed decisions regarding our purchases. However, with personal finances – which is normally the largest monthly recurring expense – instead of comparing and selecting the best product, we tend to stick with the familiar. And you can’t blame the consumer.

Traditionally, the competitive environment for banks in Finland has been skewed, which has resulted in low pressure for banks to innovate new services and create transparency. Due to lack of proper options, we have also been faithful to our banks, which has resulted in low interest and understanding of financial products.

On the other hand, consumers have not had access to innovative services, like Ebookers or TripAdvisor in travelling, that would have helped them to look for advice, compare options and select a product from one platform in a cost-efficient way.

All in all, consumers’ opportunity cost for comparing financial banks has been high due to the lack of supportive services and information, and simply because it requires a big effort.

However, the financial market is changing and opening entirely new opportunities for consumers in buying and managing personal finances. To name a few key changes, banking processes are being automatised and digitalised, which will result in e.g. faster and easier loan applications and onboarding processes. Regulation around the banking industry is also changing, resulting in more personalised products.

“The financial market is changing and opening entirely new opportunities for consumers in buying and managing personal finances.”

The new payment service directive (PSD2) is a good example where third-party service providers can, based on consumers consent, offer better services for consumers based on their banking information… and the list continues.

However, what’s even more important is that these changes will also give the opportunity for innovative service providers, such as comparison platforms and payment solutions, to enter the financial domain, co-operate better with banks and bring transparency to the market.

Fintech can empower consumers to make rational decisions on their personal finances, just like eBookers and TripAdvisor are doing in the travel industry. For banks, it can mean more cost-efficient tools to meet existing and potential customers which will, in the long term, help them to offer better and more affordable products to the customers they want to have.

Published on 24.10.2018