How fintech is changing the face of consumer finance

The UK fintech sector has attracted $5.7bn worth of investment in H1 2021, with investors eager to back disruptive start-ups upending consumer finance

August 4, 2021 | Tudor Lodge

UK fintech is growing at an alarming rate, with the sector attracting  $5.7bn (£4.86bn) worth of investment in just the first six months of 2021, according to a recent report by Innovate Finance.

From revolutionising credit scoring and streamlining payment processing, fintechs have, and are continuing, to make a huge impact on consumer finance.

Fintechs allow customers to use apps where the technology is far more advanced than what high street banks can keep up with,” says David Beard, founder of Lending Expert.

“The basic loan product is certainly becoming more digitalised,” he says. “We have been eager to see the opportunities arising from open banking that should be able to provide better credit scoring and more personalised products for things like loans and mortgages.”

In time, the fintech sector will provide consumers with even greater flexibility, offering bespoke financial products to cater to individuals whether employed, self-employed, elderly or possessing a bad credit rating, adds Beard.

Digitising insurance

The fintech sector has taken significant strides in overhauling financial services, with the insurance industry seeing the traditional broking process streamlined by digitising key processes, according to Simon Taylor, founder of get indemnity.

“This includes the proposition of online application forms, online customer portals to upload policies and documentation, omni-channel support to request feedback from customers and offering our services across mobile and apps,” he says.

Taylor expects the insurance market will follow in the footsteps of the banking industry and allow for better connectivity through APIs.

“Insurer’s legacy systems remain an obstacle, but the ability to capture and transfer detailed risk information creates efficiencies and provides underwriters with better data to price individual risks,” he says

Augmenting one-to-one relationships

Technology is playing a key role in augmenting the one-to-one relationships which are essential for any financial services provider that values customer service, says James Anderson, operations director at MT Finance.

“One of the most useful tools we have is our customer relationship management system (CRM) which provides a central view of all interactions and contact that we have with brokers, borrowers and solicitors,” he says. “Fintech allows us to respond and engage with any customers and stakeholders as fast as possible – whilst previously this would have been done manually on paper or spreadsheets.”

MT Finance also uses internal messaging platforms so its teams can better collaborate and be more responsive to the needs of clients in a world where speed and convenience is paramount, says Anderson.

Shifting consumer behaviour

The pandemic has helped to close the gap between high street banks and digital-only challengers, with consumers increasingly likely to use the latter for loans, business and savings accounts, according to Dan Kettle, founder Pheabs, a short-term lender.

“Particularly with payments, the apps produced by the fintech industry are built with a strong user experience and additional benefits such as no FX fees, instant decisions and faster payments, which makes them very appealing,” he says.

“The growth of Fintech means that we continue to move one step closer towards a cashless society, with multiple purpose credit cards and payment apps that will allow you to pay for almost anything, plus keep a better record of any transactions that cash does not enable.

“It should not be forgotten that 90% of Fintech is the processes that happen behind the scenes – and all the energy and data that goes into powering faster decision making and this is how consumer finance truly benefits.”

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