A friend or relative may have told you about the latest thing in personal finance: fintech. What is it, and does it make sense for you and your money?
Fintech is more than a bank that’s offering higher yields on CDs and other savings accounts online. Most financial institutions, including Tropical Financial Credit Union, provide online banking, ATM access, and a smartphone app.
Fintech, which is short for “financial” and “technology,” includes those plus cryptocurrencies, blockchain, online mortgage brokers and lenders, cash transfer apps like Venmo and Zelle, and even the Starbucks app that holds your purchase history and credits.
Proponents of fintech argue that the technology – some of it AI-driven – creates more choices for consumers and businesses. People are no longer tied to the nearest bank or credit union. They can access an entirely new world of financial products and services from their phone. That may sound great, but there is much to know before you switch institutions or sign on with a virtual company:
- What financial products or services do you need? At the most basic level, people need institutions at which they can keep and access their money, pay their bills and debts, and borrow for major purchases. U.S. credit unions offer all of those. FinTechs can do the same. Some are marketplaces where you shop for those products and services.
- What is your risk tolerance? The National Credit Union Association insures deposits at Tropical Financial up to limits set by federal law. Money in a cryptocurrency account, money-transfer service, and other digital services have no protection backed by the full faith and credit of the United States.
- How important is it to speak to a human? Many online companies use technology such as automated chat, email, and touch-tone phone service. They claim they can be more efficient without sacrificing customer service. But how many times have you wished you could speak with an employee by phone or in person?
- Which do you understand? Blockchain and cryptocurrency have become buzzwords. Knowing when and how to use them requires more than watching an online instructional video. Similarly, what’s the difference between an online mortgage or car loan app and a credit union lending officer?
- How valuable is your privacy? Fintechs say they keep records of your online behavior to serve you better. Some people are not comfortable with that. Also, the more places your financial information is stored, the more vulnerable you may be to having your identity and money stolen.
Before entering the unknown, decide whether you need fintech services and products and whether the risks outweigh the gains. Much, if not all of what you need may already be available through your current financial institution. Want to know more? Visit our Get Beyond Money articles and videos to build a safe, secure future.
