The Future of Payments

A Matter of Trust 54 BANKING PERSPECTIVES QUARTER 4 2018 I IN COUNTLESS AREAS of American life, a move toward digitization has taken hold, offering consumers unprecedented levels of convenience. The financial services sector is no exception. A growing number of Americans now manage their money online, and many are using financial technology (FinTech) applications. These solutions offer simple, fast, and accessible services via the web, smartphones, and tablets. A 2018 survey conducted by The Clearing House (TCH) highlighted that nearly one-third of U.S. banking consumers said they use at least one online or mobile FinTech app to help manage their finances (Figure 1). 1 Apps for personal financial management and budgeting/ saving were cited as the most popular services, followed by investment services and robo-advisers as well as lending services. FinTech apps have grown in popularity because they simplify and/or automate financial management tasks that consumers often find time-consuming or confusing. Whether users want to regularly transfer money into a savings account, track expenses, invest in the stock market, or apply for a loan – now there is an app for it. While these solutions undoubtedly offer convenience, they can also carry risk. To perform their services, FinTech apps typically need to access consumers’ most sensitive personal and financial information, including their bank account login credentials. Although the number of FinTech apps has surged into the thousands in recent years, the security protocols, best practices, and consumer protections for data sharing in the financial services space have not kept pace. Although the number of FinTech apps has surged into the thousands in recent years, the security protocols, best practices, and consumer protections for data sharing in the financial services space have not kept pace. WHICH OF THE FOLLOWING FINANCIAL APPS HAVE YOU USED IN THE PAST YEAR? 31% OF U.S. BANKING CUSTOMERS HAVE USED AT LEAST ONE FINTECH APP Personal nancial managers, budgeting/saving schemes Investment services and robo-advisers Lending services 10% 11% 19% Non-FinTech users FinTech users FIGURE 1: DISTRIBUTION OF FINTECH (NON-BANK FINANCIAL APPLICATION) USERS Percentage who use FinTech apps among bank customers, by FinTech type Source: The Clearing House