Over the last decade, technology has changed the way we do things. It’s changed the way we move — electric cars now glide noiselessly on roads, and it’s changed the way we communicate — it’s never been easier to speak with someone across the world. But another aspect of our lives that isn’t quite as prominent, but is being disrupted by technology all the same, is finance.
Here are the ways that technology is changing the world of finance.
1.Cross border payments: Until not so long ago, sending money across countries was hard. This problem was particularly pronounced for people who worked outside their home countries who wanted to send money back to their families, and for freelancers who worked with clients from foreign countries. Companies like Western Union Money Transfer helped people send money across borders, but people had to visit their offices, often stand in queues, and wait for days for their payments to be finally received. PayPal, though, has taken much of hassle out of transferring money across countries. PayPal payments are instant, can happen through the comfort of your home, and relatively cheap.
2. Retail Payments: Debit cards and Credit cards had made sure that you didn’t need to carry cash while out shopping, but cellphones have taken this a step further. Apple Pay and Google Pay help you instantly pay at many merchants. In India, wallets like Paytm and Mobikwik help customers pay instantly at shops, and in China, WeChat is enormously popular as a means to make online payments. With your credit and debit cards having effectively shrunk into your wallet, there’s little reason to carry them around.
3. Loans: Even until a couple of decades ago, loans were controlled by a small group of powerful parties — banks, financial firms and large corporations. They decided if you were eligible to receive a loan based on your credit history and other parameters. Technology has enabled startups and companies to come up with much better ways to determine who gets a loan. Companies can now track your social media profiles and your online activity to determine if you’re eligible for a loan. Given the amount of time people spend on the internet, their online footprint can give clues about how likely they are to repay loans. Other companies can often give instant loans.
4. Loans against assets: Technology also enables loans against assets which previously couldn’t have been valid collateral. CreditMate is a startup that allows people to avail of loans against their bikes, and a startup called Buddy lets students avail of micro loans to purchase e-commerce products on a monthly basis. Technology plays an important role in such transactions — the market value of bikes can be instantly assessed with technology, and students can form a network through which they can refer other reliable students on the program.
5. Bitcoin: Nothing has the potential to change the world of finance as bitcoin. Bitcoin is a cryptocurrency that operates outside traditional setups like banks and financial institutions, and even governments. Bitcoin was created in 2009 by a anonymous individual called Satoshi Nakamoto, who came up with a robust system of peer-to-peer transfers. Bitcoin is unique because it eliminates middlemen from financial transactions — while banks traditionally served as gatekeepers for financial transactions, bitcoin instead handed the power to anyone who wanted to help out mine bitcoin. The incentive for people helping maintain the bitcoin network? More bitcoin. Anyone in the world can “mine” bitcoin by helping run the system, and earn bitcoin in the process.
And bitcoin has shot up in value over the years. When it was first launched, bitcoin traded at a few cents against the dollar. At the beginning of 2017, its price had risen to around $1000. And after a breakneck run in 2017, bitcoin currently trades at an astonishing $19,000 to the dollar. Whether bitcoin has staying power, time will tell. But it’s most certainly become the most disruptive financial force of our times.