Technology has reinvented the way that humans interact with the world around them on countless occasions. Tech innovations often begin as figments of the imagination, seemingly belonging in a science fiction story rather than the real world. Yet, innovators all around the globe produce fantastical devices, frameworks for growth, and tools that help individuals and businesses succeed at whatever they are doing every day.
To say that tech impacts the financial market would be like saying that blue whales are big. This is of course true, but it belies the fact that blue whales are the largest ocean creatures on the planet. Technology is the single greatest driver of innovation known to humankind, and it imparts these monumental changes on the very existence of our being, including in the way we do business and think about finance and investments.
As we all collectively prepare for a return to work, it may be in your best interest to take stock of the cutting edge changes in the colliding world of fintech. Read on to understand some of the truly massive ways in which the markets have been upended by booming technological advancements.
The Housing Market
It’s perhaps ominous to begin with a recounting of the disastrous crash in 2008 that left the global housing market in ruins. Yet, technology and the innovative processes of finance and the financial service industry as a whole can run amok on occasion as well. For your own personal financial health and your strategy as a small business owner or investor, it’s important to learn from events that cratered a marketplace.
The crash was due primarily to a duality of investments that went bad. The first was a lack of oversight by regulators which allowed banks to package junk bonds together with high quality mortgages and shoddy lending examples bundled together. This led to an increasing default rate within the overall financial products themselves as more lower grade mortgages were placed within these funds.
Secondly, investment bankers eventually created synthetic CDOs (collateralized debt obligations) which provided an investment opportunity taking a stake in the outcome of the actual investment itself. All this relied on the underlying asset—the mortgages taken out by real people to pay for their homes—to remain stable, which they, of course, did not as a result of the continuing degeneration of high quality lending practices.
The technological innovations of the financial services industry in all its nuances doomed the property and economic marketplace of the world to collapse.
The Insurance Marketplace
Unlike the free rein that brought the housing market down upon itself, the insurance marketplace relies on regulations and financial institution responsibility. Consumers can rest easy knowing that their peace of mind comes first, and the benefits of their policy will kick in should the need arise.
Insurance has evolved in recent years as a result of changing technological advances. Paycheck protection, disability insurance, and income protection insurance are staples of the market these days. Being insured extends past the roadways now; families are thinking about how they would survive if an accident took away a parent’s ability to provide. With income protection insurance, paying the housing and freeing the family would continue uninterrupted. Today, families are able to add these protections on to their policies without hassle and often online.
Open bank practices are one of the most fascinating changes among those making waves within financial institutions and the financial services industry as a whole. Open banking offers users an easy API that helps consumers link finance products for a more streamlined and secure layout. Rather than linking accounts by providing login credentials, open bank operations offer a new take on connectivity. It gives users the ability to automate their overlapping account details so that there is no longer a need to provide passwords or other sensitive information to link accounts and create a detailed accounting of your overall finances in one place.
The financial marketplace is changing with the times. Make sure you understand the role that technology plays here in order to stay on top of your personal finances, debts, and investments with style and longevity.