The 2024 Tech Trends Survey revealed that 72 percent of the 3,400 surveyed finance businesses will spend more on software this year. The top priorities are IT security and management.
At the same time, there’s a significant uptick in global financial technology (fintech) users. The digital payments segment has the highest share and is expected to exceed 3.5 billion this year.
This digital transformation in the finance industry is significantly impacting personal finance.
So, what technological trends shape the personal finance landscape, and what are their benefits for consumers? Do these innovations have pitfalls you must be aware of?
Read on to learn more.
Digital Personal Finance Apps and Tools
Digital personal finance management apps and tools offer various solutions to help you manage your finances. These platforms are designed to simplify processes and provide actionable insights to ensure you make informed decisions.
The most frequently used personal finance management tools are budgeting, credit monitoring, and investment platforms.
Budgeting apps
Budgeting apps enable you to break down expenses into categories, such as bills and groceries. They generate a real-time view of your spending habits and determine areas where you can save more money.
Credit monitoring tools
Credit monitoring is crucial to personal finance because it identifies errors, fraud, and other factors affecting your score.
With credit monitoring platforms, you can stay informed about your financial health. They also provide guidance and strategies to help you understand and improve your credit score.
Investment Platforms
Investment platforms offer various investment opportunities, such as stocks, bonds, exchange-traded funds (ETFs), and mutual funds. They help make investing more accessible, letting you diversify your portfolio and maximize returns.
Blockchain and Cryptocurrency
Blockchain is a distributed ledger or database. It is a technology shared among a computer network’s nodes and is best known in cryptocurrency.
Cryptocurrency is a virtual currency with cryptographic systems. They enable secure digital payments without using third-party intermediaries.
In 2023, the global digital currency user base reached over 420 million, with an average ownership rate of 4.2 percent. These findings suggest the enduring presence of cryptocurrencies in financial services, including personal finance.
As blockchain and cryptocurrencies continue to develop, these integrations are expected to redefine personal finance by providing heightened accessibility, efficiency, and transparency to global consumers.
Quantum Computing
Quantum computing has quantum mechanics that solve complex issues conventional computers can’t address. It is an emerging advancement expected to provide more tangible benefits this year.
Unlike standard computers with bits (which are either zero or one), quantum computers have quantum bits or qubits. This technology can simultaneously perform various calculations through quantum superposition and entanglement.
Financial institutions are the early quantum computing investors. They aim to harness this technology’s capabilities to scale up AI systems for fraud detection, risk management, and high-frequency trading.
Therefore, personal finance companies can integrate quantum computing to safeguard financial data and enhance management, providing convenient and secure online banking and financial management experiences.
Personalized Experiences With Artificial Intelligence (AI)
AI constantly evolves and plays a significant role in the financial services industry. This year, we expect a considerable increase in AI-driven automation to create more personalized consumer experiences.
Financial institutions can use AI to examine customer data and treat each client as unique. This strategic adoption helps restore human elements by recreating brick-and-mortar services.
As a result, banks, lenders, and other financial entities can reestablish the personalized touch of face-to-face financial interactions, ensuring you feel heard, valued, and understood.
Open Banking
Open banking allows you to aggregate your accounts into one real-time dashboard through application programming interfaces (APIs). This practice is becoming a significant innovation poised to reshape the financial services industry.
Networked accounts can help you securely share your financial data with other financial providers rather than relying on centralization.
For example, open banking APIs can simplify switching from one bank’s checking account to another. The APIs can also analyze your data to identify the best financial products, such as a new savings account with a higher interest rate.
Lenders can also obtain a more accurate picture of your financial situation and risk level. At the same time, you can get an accurate view of your finances before taking on debt. This way, you can receive the appropriate guidance before making a decision.
For instance, you can get a student loan help guide that can help you calculate the repayments you can afford after graduation. The same goes for other loans like mortgage, auto, and personal.
Insurance Tech (Insurtech)
Insurtech explores avenues insurance firms have less incentive to exploit, such as ultra-customized policies, social insurance, and new data streams from Internet-connected devices, to price premiums strategically based on observed user behaviors.
In addition to enhanced pricing models, insurtech start-ups use deep learning-trained AI to handle broker tasks and determine the right policy combinations to complete your coverage.
There is also a growing interest in using apps to merge policies into one platform for management and monitoring. This emerging insurtech innovation aims to create on-demand insurance platforms for micro-events like borrowing a friend’s vehicle and adopting the peer-to-peer model.
Robo-Advisors for Investment and Financial Planning
Robo-advisors are virtual platforms with automated and algorithm-driven investment and financial planning services. They often ask questions about your goals and financial situation through online surveys. Then, they’ll use the data to provide advice and automatically invest for you.
However, robo-advisors are best suited for traditional investing. They aren’t ideal for more complex services like estate planning.
Potential Hurdles of Tech Innovations in Personal Finance
Although personal finance tech innovations have promising advantages, they have potential hurdles you must understand. These drawbacks include:
Data security and privacy concerns
Personal finance solutions handle massive amounts of sensitive financial information. As technologies evolve, the risk of breaches, identity theft, and unauthorized access concerns many users.
To address these issues, financial service providers must implement robust security measures. These practices include encryption, periodic security audits, and integrating protection features like multi-factor authentication.
For example, the recommended advanced encryption standard (AES) uses the 256-bit key. It is considered a virtually impenetrable algorithm, even with the fastest computers. Other keys include 128-bit and 192-bit.
Complex and costly regulatory compliance
Financial companies operate in heavily regulated environments.
As such, new tech innovations mean new regulatory compliance. These regulations can be complicated and costly for financial institutions due to the following reasons:
- Incompatible frameworks
- Limited access to regulatory access (for start-ups)
- Lawmakers struggling to keep up with new fintech innovations
However, fintech companies must comply with policies like anti-money laundering, Know Your Customer (KYC), and General Data Protection Regulation (GDPR). This way, they can build personal finance tools that users can trust with their financial information.
Tech unfamiliarity and transparency
Unfamiliarity with new technologies can be a barrier to personal finance tech adoption. Fintech companies can address this by providing user-friendly interfaces and comprehensive educational resources.
Customer support, FAQs, and tutorials can help you understand how to maximize the platforms’ benefits. Simplified onboarding processes and demonstrations can also make it more accessible for users to get started.
Moreover, you should check a platform’s commitment to transparency. The providers must be open about their policies, practices, and risks.
For instance, information about how your data is collected, used, and protected helps foster a transparent relationship with users.
Digital divide and accessibility gaps
While fintech innovations offer convenience, digital gaps in accessibility may exclude specific segments due to a lack of digital literacy and access to technologies.
One significant hurdle is the digital divide. Many people in rural or economically disadvantaged areas may be unable to access high-speed Internet services and the latest fintech devices.
People with disabilities may also struggle despite having access to the Internet and devices. Those who are unbanked or underbanked may even find fintech intimidating.
Internet and technical infrastructure reliability
Fintech solutions rely on the Internet and stable technological infrastructure. Any disruptions or technical issues can impact the availability and reliability of the services.
These problems can be frustrating and inconvenient.
For instance, if your connection is slow or unstable, you might be unable to finish urgent transactions. Similarly, downtime and system failures prevent you from accessing your accounts.
Maximize the Advantages of Personal Finance Tech
Personal finance is facing a significant transformation. This transition is characterized by tech innovations designed to revamp how you interact with financial services.
However, it’s essential to understand the downsides you might experience while using these technologies. This understanding will help you maximize the platforms to ensure the benefits outweigh the drawbacks.
As such, you can embrace the advancements and navigate the evolving fintech landscape with confidence and control.
