Taking into account new demands, needs and wishes of customers, fintech companies offer new services that were previously offered by traditional or innovative banks, often even at a reduced cost. These services may only target a specific segment of customers, such as the younger generation.
Categories of fintech: Which ones exist?
Fintech companies, like their counterparts in insurance or financial regulation, are startups that provide financial services using new technologies such as the internet, smartphones, blockchain, etc. They often take a disruptive approach by offering new services and new customer experiences. These companies almost always operate at a reduced cost, making them accessible to a wide range of users.
Most fintech companies offer basic services for free or nearly free, supplementing them with paid premium features as part of a ‘freemium’ business model. Given the abundance of such initiatives, it is impossible to exhaustively describe the contribution of these fintech companies. Their approach to leveraging technology and changing the customer experience is becoming an important part of the evolution of the financial industry.
Let's take a look at the categories of key areas of the fintech market that offer state-of-the-art solutions for various financial needs:
- Neo-banks: Digital banks that offer banking services entirely online, without a physical branch. They allow users to manage their finances through mobile apps, providing convenient tools for everyday transactions, sometimes targeting SMEs;
- Crowdfunding and equity financing: Platforms that allow users to invest in projects and receive a share of profits or other rewards. These services provide alternative funding opportunities for businesses and entrepreneurs, supporting start-ups, charitable initiatives and small businesses;
- Savings services: Companies that help users manage their savings and investments. They often use roboadvisors that automatically tailor investment strategies based on a user's profile and financial goals;
- Fundraising platforms for common causes: Services that allow groups of people to raise money for common causes, from gifts to events. These platforms make it easy to collectively fund and distribute funds transparently;
- Cryptocurrency services: Platforms that allow users to buy, sell and store cryptocurrency such as bitcoin and etherium. They provide access to digital assets and often include tools for trading and managing a portfolio of cryptocurrencies;
- Account aggregators: Apps that collect account and transaction information from different banks and financial institutions in one place, giving users a complete overview of their finances. This helps simplify budgeting and expense management;
- Payment Service Providers (PSPs): Companies that provide support for everyday payment transactions such as transfers, card processing and online payments. They often offer integrated solutions for businesses, making it easier to accept payments and manage cash flow.
Everyday banking services
Fintech companies offer a wide range of everyday banking services with a focus on payment transactions. In addition to neo-banks that can provide a full range of traditional banking services, other fintech companies are not credit institutions but have been authorised by the Authority for the Control of Prudential Regulation and Authorisation (ACPR) or its European counterparts to operate as payment or e-money institutions. Their offers are based on a website and/or a smartphone app with a free account linked to a bank card and reduced fees for payments, especially abroad. Underage banking has traditionally involved a young person having a passport account and a card for cash withdrawals and sometimes prepayments, with spending restrictions.
Increasingly, young people are also being offered the option to pay online using a smartphone (top up, pay for purchases or subscriptions, etc.). Many fintech companies, which are not banks or even credit organisations but payment institutions, have introduced new services for this target customer group that neo-banks and even traditional banks are only gradually incorporating into their offerings. Each fintech company has identified processes and services that it hopes will set it apart from others (e.g. integrated ‘wallet’ access, systematic transaction notification, alerts, account management advice, etc.). The offer often includes a basic version, which is free or almost free of charge, and a ‘premium’ version, which costs an average of 5 euro per month in 2024.
Parents or guardians can open an account for the teenager with a fintech provider, which will give the young person access to a payment card and a mobile app to monitor spending. Teens can spend money up to predetermined amounts, with no overdraft options, and parents can monitor spending in real time through the app with notifications of every purchase. Features are also available to restrict certain categories of spending and block the card, allowing parents to monitor their child's financial activity remotely.
New opportunities for customers: Pros and cons
Apart from advantages such as simplicity, speed and low cost, these services are modernising the services they offer to young people. Let's take a closer look at the advantages:
Targeting youth directly;
Introduction to managing budgets, banking and financial relationships (including savings), although we may wonder if this doesn't reinforce the idea that money is magic and doesn't come from us;
Providing a degree of security. There is also the opportunity to discuss budgeting and finances while limiting risk with parental controls.
But apart from the good so there are also less positive points such as:
Easier system of making online purchases, including spontaneous and irrelevant ones;
Reinforcing the tendency to consume through marketing approaches that are sometimes questionable: promotional prices for brands popular with teenagers, but not necessarily the most appropriate;
The problem of a more ‘easy’ attitude towards money, which is not a common ‘commodity’.
Conclusion: How fintech is changing banking services
Fintech companies continue to change the way banking services are approached by offering convenient and affordable solutions for different age groups, including young people. They give customers more flexibility and control over their finances, but they can also put young users at risk of taking money lightly. These companies make it easier to access money and make purchases, which can both help and bring certain risks. It is important that customers recognise the pros and cons and approach new financial opportunities responsibly.
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