The march towards a financial democracy

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Over the past decade, many areas of our lives have been impacted by the rise of technology.

Technology has changed how we shop, date, eat and bank, offering services and making products that are simpler, cheaper and more convenient than ever.

This revolution has also liberated us. Startups have loosened the grip of multinational corporations, whose virtual monopolies had resulted in poor outcomes for consumers.

Technology has given power back to the consumer, nowhere more so than in financial services. This philosophy is central to what we’re building at WiseAlpha.

The financial crisis changed everything

Alternatives to traditional financial services emerged as the financial crisis was wreaking havoc on the world’s banking system. That’s no coincidence.

A decade ago, consumer trust in the banking sector fell to an all-time low. People no longer trusted the institutions that looked after their money. Having been bailed out by central banks and taxpayers’ money, the banking sector promised to reform its ways but, ten years on, not a lot has changed. And consumers aren’t stupid. Many have voted with their feet, choosing to leave traditional financial services providers, preferring low cost, technology-led alternatives with reputations untarnished by past misdemeanours.

The crisis also was a great test bed for innovative forms of finance that sprung up to offer consumers and businesses alternatives to traditional forms of saving, lending, and capital raising. Entire industries gained popularity and traction at a time when people were tired of using providers that were expensive, impersonal and short of trust.

Peer-to-peer lending is one example. Forged in the fires of the financial crisis, the industry was boosted by the stagnant funding conditions that followed when banks all-but-refused to lend to individuals and SMEs. Other funding sources emerged, as innovation through technology offered new options to those seeking cash. The likes of Zopa and Funding Circle flourished.

A demand for control

Over the last decade, individuals and businesses have shown a desire to be more in control. They no longer want to hand responsibility for their affairs over to an anonymous provider who is going to charge them high fees for low-quality service.

Modern financial services — from Monzo to TransferWise to Crowdcube — are the poster boys of fintech, offering customers personal service, security, low costs and a feeling that their interests were being looked after.

Technology made this revolution possible. The advent of mobile technology, as well as more faith being given to online marketplaces and trust being awarded for securing applications, means that consumers can now control their finances from their pockets.

Individuals have been given access, they’ve been empowered, and Tech has made finance democratic again.

The importance of progressive regulation

Crucially, progressive regulation is also creating an environment that is weighted towards the needs of the consumer, rather than the institution. This has meant that fintechs have been able to offer alternatives to traditional forms of financial services while providing the same level of security and trust. 2018 saw PSD2 and Open Banking both being rolled-out in the UK, both of which focused on putting the requirements of the individual above those of the bank.

By extension, as hundreds of millions of more consumers come online all over the world every year as the internet and mobile technology spreads, billions of people will be given the opportunity to use banking services for the first time.

A word of caution

Financial democracy isn’t a panacea — the consumer is still primarily controlled by corporations. However, it’s no longer banks doing the controlling. Now it’s the tech companies who are becoming masters of the universe. And with every step towards liberty and freedom comes the worry that you have to give something up something precious to access the benefits. As we’re increasingly finding out, large providers who have for years offered services for no cost have actually been taking and storing something in return: our data.

To achieve democracy, sacrifices must be made. But what the extent of these sacrifices entails is hard to know. How far we’re willing to go for financial freedom is dependent upon each individual’s view on what it means to be free. The success of fintech providers has been based on trust and belief in their brands and operating systems. The collapse of one platform to a data breach or hack — not unlikely, especially given the sophistication of criminals — could slow down the march towards freedom.

We believe in a financially democratic future

At WiseAlpha, we believe in a financially democratic future. It’s why we’re building our business, giving everyday investors direct access to the institutional corporate bond market — that they’ve never been able to access.

Our business neatly sums up what has happened in the last decade in financial services. The barriers to entry have fallen. People and small businesses can now access the same level of services, products, assets, and fees that used to be the preserve of investment bankers and institutions who were hundreds of years old.

Now, in 2019, that has changed. Whoever you are and however much money you have, you can high quality services and products across every asset class and do all of this for a meagre fee, just by tapping a button or two on a piece of plastic and metal that’s right there in your pocket. That’s pretty awesome. And that is what financial democracy looks like.


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