Fintech Megatrends Transform Our Relationship with Money

The Wharton Global Youth Program’s Future of the Business World online course asks high school students to think deeply about how the landscape of business will change over the next 10 years.

When we recently posed this question to teens around the world, many responded with observations about technology, machine learning, artificial intelligence and pressing social and environmental issues. A few mentioned apps like Venmo and PayPal as fundamentally changing the way we interact with money.

Herein lies our jumping-off point: the intersection between finance and technology, which is so much more than an app on your phone – in fact, it involves all those above influences that are transforming the business landscape. It is fintech, and it is the future of business.

We recently scored Zoom time with someone at the forefront of fintech, both as the founder of a startup and as a first-year Wharton MBA who is the incoming president of the Wharton Fintech Club. Nathan Soffio has spent 10 years in product engineering at startup tech companies, some of them focused on finance, and is considered a fintech guru – in other words, he knows a whole lot about how the intersection of finance and technology is impacting your lives.

So, we asked him just that: What are some of the essential ways that the fintech industry is changing personal finance (appropriate given that April is Financial Literacy Month in the U.S.) and influencing the future business landscape?

First, he clarifies, fintech isn’t really a standalone industry: “Fintech plugs into almost everything we do in the digital age, which is why it’s so crucial that it continues to develop with transparency and equity,” says Soffio, whose startup business Proofetch is focused on financial inclusion and helping people access core checking and savings accounts even though they haven’t previously been part of the traditional banking system. “Checkout online? Fintech. Split a Venmo payment? Fintech. Applying for a loan? Fintech. Fintech is not just the apps you use to pay and get paid, but anything that involves making that money work for you, making sure that money is secure wherever it goes, and making sure you can get smarter and healthier with your money over time.”

With that, Soffio identifies four macrotrends in fintech. Fasten your money belts, because these digital developments will have you interacting with money in new and provocative ways, while also inspiring innovation and transformation in business.

  1. Embedded banking. Embedded banking describes banking-like services that live in all sorts of other apps that aren’t actual banks. Yes, Venmo is one example. Soffio describes it like this: You have the apps on top delivering a slick user experience, then you have a middle layer of companies that do banking as a service and allow you to manage checking, savings and sharing payments without interacting with an actual bank, and then the bottom layer beneath that is made up of traditional chartered banks. “Financial apps will continue to get more interesting and cooler and slicker and more functional as they get further and further away from any kind of underlying bank. This is embedded finance,” notes Soffio.
  1. Financial health and wellness. Apps like Mint and Credit Karma have been on the rise in the past five years, aggregating data from consumers that helps them make smarter financial decisions based on their lifestyle and past choices. This trend is gaining momentum, suggests Soffio. “The data is going to be easier to use, and more financial institutions and apps living close to the consumers will be throwing off useful data that financial health and wellness apps can use more effectively,” he notes. “Financial-service providers will be put in a position where regulators force them to publish out their data in ways that make it easily analyzable. Apps themselves will get better at providing suggestions and recommendations about what people should do.” The flip side? Not all of that advice will be sound. That’s why, cautions Soffio, it’s still important to learn foundations of money management in school and in your community so you can distinguish between the good and bad apps. Technology is not a replacement for strong financial skills.
  1. Getting paid. Soffio anticipates innovation around payroll, meaning that the salary you earn will be paid to you with more flexibility, rather than the traditional paycheck every two weeks or once a month. “I think it’s interesting how so many people are freelancers and creators and part of the gig economy these days,” says Soffio. “There will be a very interesting growth of flexible payment apps or flexible payment options as the plumbing between consumers and banks gets much smarter by all those companies that live in the middle.”
  1. Cryptocurrency and blockchain. Soffio calls this the “weirdest” fintech megatrend because it has so much uncertainty — and yet it makes his top 4 because it is everywhere. As of last week, for instance, you can buy a Tesla with bitcoin (digital money); however, Soffio predicts, “I don’t see being able to buy a sandwich with a bitcoin anytime soon.” And then, of course, there are NFTs or nun-fungible tokens, which are unique tokens (with value) on the blockchain. Stay tuned for a separate story exploring NFTs, which are both cool and somewhat complicated. For now, though, Soffio says blockchain technology, a system of recording information in a way that makes it nearly impossible to change, is going to inspire better financial record-keeping. As for actual cryptocurrency, he is taken with the concept of Central Bank Digital Currency. With this, central banks can push digital money into the economy without affecting the inflation rates or devaluing the currency – and potentially help underserved people who are not part of the traditional banking system to access alternative sources of finance.

Conversation Starters

How has your relationship with financial technology changed during the pandemic? Do you rely more heavily on apps to manage your money? Which one is your favorite and why?

Which of the four fintech megatrends resonates most with you and why?

If you could tackle a problem related to finance, what would it be? Learn more about that particular challenge and then figure out four ways you might become part of the solution.

6 thoughts on “Fintech Megatrends Transform Our Relationship with Money

  1. Trend 2 “Financial health and wellness” is going to make the biggest step up impact on a community before other underlying services like blockchain and embedded banking. I think in order to get people into that trend they first need to be reinforced of the importance of personal finance. I think the pandemic sped up that trend for 2 reasons. 1; people had money problems so they needed money solutions 2; the online creator economy drove that content out there. Peer to peer sources like YouTube (Stephan, Jikh, FiRE channels) showed many people that they can do much more with their dollar.

    My thoughts, great article.

    – Rylan

  2. I certainly agree with you, Rylan. Throughout the course of the pandemic, people stuck at home became more aware than ever, how much they can truly grow their money. On top of that, most families were able to immediately cut out so many costs that would otherwise take up their much of their monthly income, allowing them to began redirecting all that money towards savings accounts or brokerage accounts for investments. This huge trend caused more families to now rely on more “financial health and wellness” apps to better budget their money. The time for education and growth as the world was quite literally put on pause gave people an opportunity to utilize fintech apps and further educate themselves on passively growing their income. I also believe access to such apps and education will soon be the fundamental force pulling lower income or previously uneducated groups out of poverty and into the world of financial independence.

    – Sahithy

  3. To add to Mr. Scoffio’s fourth (and most weird) fintech macrotrend, the introduction of decentralized finance will change the banking system as we know it. A majority of cryptocurrencies are exchanged by various means on blockchain networks known as “DeFi”, or decentralized finance. Interestingly, DeFi networks do not involve an intermediary party, such as a bank, to execute a financial transaction. Excluding intermediaries will enable everyday individuals to immerse themselves in a more transparent, smooth-running, and cost-effective system of exchange. For example, loaning will become far more widespread, with increased access provided to the underserved. Along with more access, better opportunity for all, regardless of financial status, will follow in pursuit. Ultimately, this current era is an exciting and promising time for the fintech industry and all individuals, and a full-fledged shift to a decentralized financial system could be just on the horizon.

  4. Hi Ethan M.,
    I agree with your view that blockchain technologies will reinvent the banking industry. As you say there are many benefits to banking in a decentralized way by using the blockchain.

    One concern I have is the extreme volatility in cryptocurrencies. One week bitcoin is at $60,000 and the next it is approaching $30,000. It is very hard to find use out of these cryptocurrencies due to their unpredictability. One reason why Tesla may have stopped accepting bitcoin to purchases Teslas (in addition to the environmental concerns) is that it is currently not efficient. There are several fees and taxes involved in bitcoin transactions that hurt a companies bottom line profits. Also, accepting bitcoin makes the company’s financials unpredictable and very volatile. What public company would want to tie its earnings to such a volatile and unpredictable asset like bitcoin. Tesla may accept one $50,000 bitcoin to purchase a model Y, but by the time their earnings are reported that bitcoin could be worth $10,000. This could result in Tesla loosing a tremendous amount of money. As it is, Tesla already lost money on their bitcoin investment.

    In the future, I hope to see a more stable cryptocurrency that can more efficiently reinvent banking and transactions with the benefits you listed in your comment. One solution to this issue could be the use of stable coins which are cryptocurrencies that are tied to fiat money such as the US dollar.

    Ilan Puterman

  5. It’s hard to believe that I will turn 18 in less than a year.

    As a kid, I’ve always wanted to grow up faster, craving for multi-day sleepovers with my friends and drinking “adult only” juices with the colors of the rainbow. I remember sitting at the dinner table every evening as an elementary schooler and listening to my parents and older brother engage in conversations regarding politics and the stock market. Jargon would spill from their mouths, and I would try my best to decipher the vocabulary and interject. My parents would chuckle at my antics, while my brother would tell me to zip it.

    Even though I’m about to be a young adult, it’s still hard for me to talk about economics and anything related to “adulting 101″ with my parents. Unfortunately, this is a reality for many teenagers and students my age. A majority of schools don’t provide courses that prepare students for adulthood, and we are told to focus on our academics because getting into a prestigious university is apparently enough to set us up for the rest of our lives. We’re not informed about taxes, loans and student debt, and the stock market, even though they are responsibilities that will be a reality for us. Instead, we have to go out of our way to educate ourselves and find tips and tricks off the Internet.

    A few months ago, I asked my brother how he became so well-informed. He’s currently working as a software engineer at a fintech company, and my question elicited the same chuckle from him as that of my parents.

    “I just read a lot,” he shrugged. I furrowed my eyebrows in confusion. “No, I’m serious. I just found books and articles to read whenever I could.” He also clarified that those conversations at the dinner table weren’t actually conversations. They were more like interviews, my brother picking at our parents’ brains.

    These bits and pieces of my memories are all to say that my generation is well aware of the importance of finance and that we recognize fintech as the future. Fintech will act as both a convenience and a source of innovation and creativity. But I’m not sure if Gen Z can fully appreciate and utilize it.

    Especially after the pandemic, Gen Z has faced the worst in terms of unemployment rates. For example, in March, the unemployment rate for Gen Z in the United States was 15.1%, more than twice than that of other generations combined (7.1%). In other countries, such as the United Kingdom, Finland, and France, they experienced almost a three to five times difference. Finance has become one of the biggest stressors for my generation, and a large majority of us have no idea where to begin in order to address this worry.

    As mentioned in the Knowledge @ Wharton article, apps such as Mint and Credit Karma are helpful in that they provide personalized advice for each user. They suggest financial options that users may not have considered themselves. However, these apps can only go so far. These apps aren’t obligated nor do they provide a crash course for its users to learn about the financial sphere. Unless we provide the educational resources necessary to teaching financial literacy, Gen Z individuals may hesitate and turn away from the aforementioned apps because they’re scared of being tricked or scammed.

    Luckily, a plus is that fintech is starting to expand into the educational sphere as well. As Nathan Soffio mentions, there should be more programs and tools that address the lack of financial literacy among young adults. This has actually become a growing trend for startups. I know plenty of teenagers who are researching and developing apps that tackle this disparity in their own time, and larger companies such as Goalsetter are already beginning to make an impact by providing resources for and helping parents financially prepare their children. Interestingly enough, we can use fintech to teach fintech.

    Similar to my peers, we want our generation to be one of–if not–the most financially educated. We are facing many existential crises that are linked to politics and the economy, and it’s time for us to engage with the latter. Gen Z is known for being open-minded and flexible, and I’m confident that we can continue to become more financially informed and make decisions that our beneficial for ourselves and for our planet.

    Fintech isn’t something we should avoid or be scared of. If we are informed and use it wisely, it can easily become one of our strongest tools to combat other prevalent issues, such as climate change and the wage gap. Fintech is the future, and we should learn how to harness it.


  6. The advancement of Fintech is one of the most dominant trends in the past decade. The fascinating helped me realize that we, as a society, are becoming much more reliant on technology. I wouldn’t have understood this article a year ago, but during quarantine, I started to get involved in and learn about the fundamentals of the Stock Market. Of course, I didn’t go to a bank to set up my account; it was all digital. All this was made possible by apps like TD Ameritrade’s Thinkorswim, Webull, and the infamous Robinhood. These apps soared in popularity gaining millions of users on their platform through the course of quarantine. Now investing is merely clicking a few buttons and two swipes away. I personally use both Thinkorswim and Robinhood since each app offers different experiences to trading stocks and crypto. Of the two popular apps, my favorite fintech is Thinkorswim. Thinkorswim has 0 trading fee while also providing many useful charts and indicators such as simple moving averages, RSI values, Bollinger bands, and much more that I utilize to make each decision in the stock market.
    There is no doubt that Fintech is disrupting personal banking; most banks are losing customers. However, this is not necessarily a bad thing, the Fintech disruption in banking led to better financial management tools, mobile payments, crowdfunding, fast loans, peer-to-peer lending, and even (Insurance technology) solutions
    Rapid digitization of the fintech industry is changing customer’s mindset from conventional banking to conventional banking. Customers do not visit banks anymore. They prefer using services online for convenience and seamlessness. Covid helped the consumers of the product embrace fintech of all sorts since Fintech isn’t face to face; Instead, it’s all virtual, making it much given the circumstances of the past years.
    In the future, I think this will lead to lower costs for the services. For instance, almost all brokerages trading shares have 0 commission fees when just a few years ago brokers would take a percentage of the capital gain. As of right now, any crypto trading accounts such as Coinbase and Binance, still have a transaction fee of 1% which can rack up to a lot of money if one’s trade volume is very high. But with time and the increased involvement in the crypto world using fintech, I believe that trading crypto will be free to trade.
    Though they can arguably also make banks a “safer” option for consumers, too expanding financial inclusion and using technology to cut down on operational costs. Again, thanks to this article, I was able to reflect on how much Gen Z has adapted to utilizing fintech throughout the pandemic. I will surely be on the lookout to see how Gen Z affects the future of fintech and the industry of banking.

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