Startups

Digital-only banks, currency exchange made easy: the Fintech revolution

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Startups focusing on the problem

If you like travelling like me, you know that it’s painful being abroad and using your card with a lot of non-sense commissions to pay when you want to use your bank card. And you have to pay those bank commissions, simply because you’re using your card abroad, in shops or because you need to withdraw local currency.
Is it fair?

You’re giving your money to banks for free, without earning any interest (you’re lucky if you’ve not to pay to get some additional services). And, if you need that money while you’re on holiday abroad, you have to pay for it. Maybe 30-40 years ago not everyone was interested in using the card abroad, as only a few of us could go abroad on holiday, but now it’s what everyone is doing. Meaning that those banks are earning a lot of money just because of new people’s behaviours and none is really thinking different, segmenting the audience and understanding their needs.
That’s how a big bunch of startups is offering new services in an industry commonly known as Fintech, disrupting the traditional way banks are operating and getting a lot of interest and funds: in the UK more than $5.5 billion (£3.8bn) of investments were made in the fintech industry between July 2015 and January 2016.

Find a specific (fintech) need and create an amazing service

In the brand new world of fintech startups working to satisfy specific needs, providing effective and efficient services for a niche of people a few of them are very very interesting. And I’m glad to share the ones I think are implementing a very good service.
I’ve already talked about Transferwise, allowing people to transfer money between different countries paying just a little fee compared to what you pay to banks (in my last year’s startup roundup). The technology is based on a peer-to-peer system, so if someone wants to convert their pounds to euros, TransferWise’s technology finds someone who wants to transfer money in the opposite direction (euros into pounds)

Join the Fintech revolution!

A brand new part of fintech startups is represented by digital-only banks, which are going to start operating this year, such as Mondo, Tandem, Starling and Atom. But what does digital-only banks mean?
If high street banks have been using digital technologies to help transform various areas of their business, those new banks have decided to go all digital instead, in order to offer a fully integrated mobile experience in which customers use their smartphones or tablets to do everything from opening a new account and making payments to resolving credit-card billing disputes, all without ever setting foot in a physical branch. Without losing time, having to fill out lots of papers or having to pay hidden fees.
Do you think it’s just a cool idea and high street banks will never disappear? Well, according to this McKinsey report, “in the United Kingdom and Western Europe, there is a potential for 40% or more of new deposits to come from digital sales by 2018
And in terms of digital evolution, we’re ready, as you can see from the graph here below.
And you should read this report by the Deutsche Bank, if you’re keen to understand whether we’re ready or not.

The digital revolution in the financial sector - the fintech revolution

But let’s come back to startups providing specific services in a cheaper and more efficient way.
I personally love Revolut allowing you to use your money abroad without incurring in fees.
I love travelling and I don’t really like paying fees just because I’m using my card to withdraw money abroad or because I’m using it to pay in shops. Revolut, working like a digital wallet, allows you to transfer money from your account to your Revolut account through the app and then use it thanks to a physical MasterCard. Once abroad, you can use the card to make your purchases or withdraw money without incurring in any fees. Isn’t it amazing?
The next one I want to try is Nutmeg an online wealth manager helping you to invest money without having to go to a physical bank. When you register you tell the platform how much you want to invest and the risk you want to take before being presented with a portfolio, chosen by the Nutmeg team. No algorithm. Same concept as the Italian MoneyFarm, I should definitely try both.

Then, there are fintech startups helping SMEs to get money with less hassle, faster and cheaper, but they’re a lot. Better if for today I stop there.
Enjoy your August peeeeps!

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