It’s time we all embrace the digital banking revolution

glitchy image of a sack of money

Illustration via Max Fleishman

Those who embrace innovations in finance will save, invest, and get rid of debt faster—and with less effort—than any preceding generation. Those who don’t will be left behind.

Nearly a decade later, the country is still reeling from the aftermath of the Great Recession. Big

banks have become synonymous with greed. We share a deep-seated distrust of financial

professionals hawking supposedly low-risk, high-return investments. And then there are the

massive data breaches, which have become part of everyday life. 

It’s time we get over it.

Technology has the power to make us vulnerable—but also to revolutionize the way

we manage and grow our wealth today. Those who embrace innovations from technology and

finance will save, invest, and get rid of debt faster—and with less effort—than any preceding

generation. Those who don’t will be left behind.

Greater transparency 

Not many years ago, personal banking data was essentially locked up by banks. It was hard to

even check your transaction history or balance online, never mind pay bills or transfer cash to

friends. Then came financial data pioneers like Yodlee and Mint in the early 2000s. These were

the first tools to aggregate online financial data and put it in the hands of consumers. 

When it comes to purchases, consumers now have the upper hand over retailers and

corporations. Previously, this was not a transparent process. All we could do was shop around,

trust the recommendations of friends, and hope to get the best deal. 

Now, search engines such as Google and Yahoo compile the lowest prices across the Web with

a single keyword search. Tools like Honey scour thousands of online discount codes and

automatically apply the best one at checkout. 

Even companies like Kelly Blue Book and TrueCar have used data and technology to render the

stereotypical predatory car dealer extinct. Buyers can quickly research pricing, rebates, and

what other buyers are willing to pay, giving them an unprecedented advantage in a historically disadvantaged conversation. 

Lower costs 

In addition to transparency, financial technology—better known as fintech—has made managing money much easier and cheaper for

consumers from all economic backgrounds.

Perhaps the most groundbreaking example is the rise of robo-advisory services. 

Consumers have caught on to how they’ve been robbed of their hard-earned retirement funds

by high-cost mutual funds. Enter “robo-advisers” like Betterment and Personal Capital. These

new services offer competitive returns at a fraction of the cost of a traditional financial adviser.

The key: index funds, which have lower costs and historically outperform even the best

mutual funds. 

Plus, normal investors shouldn’t have to maintain portfolio balances of $250,000-plus to receive quality

investment advice. While traditional financial services might charge a 1 percent annual fee on assets

under management, robo-advisers charge as little as 0.15 percent. 

As financial institutions eliminate physical branches and other overhead costs, consumers will

continue to reap the savings. 

Smarter recommendations 

In recent years, the number of fintech companies creating innovative banking experiences has

exploded. 

Thanks to the massive amount of readily available data, these online tools make it possible to

quickly aggregate a user’s personal financial details. Sophisticated algorithms are then able to

recommend a custom, detailed plan within minutes. 

For instance, Mint can track a user’s spending, savings, investments, and debts to craft a

comprehensive budget. Mint users can easily set and track goals such as saving for a down payment on a home. 

Credit Karma pulls data from multiple credit bureaus to provide free credit scores. Users can

track credit changes and simulate their future scores based on various hypothetical actions.

Even student loan repayment can be streamlined with these services. My company, Student

Loan Hero, analyzes users’ real student loan and financial data to recommend repayment plans

and find student loan forgiveness options. Our app can even complete and submit consolidation

and income-driven repayment applications on their behalf. 

The ugly side of digital banking 

We shouldn’t fear technology when its capabilities to help us grow our wealth far surpass the risks.

While all of this is well and good, we still can’t ignore the fact that with new technology comes

new threats to our personal information. 

It seems like there are dozens of new apps released every day. And while the creators of these

apps and tools (hopefully) have good intentions, who’s to say that they’re actually helping you

make smart financial decisions? To put it simply: How do you know who to trust? 

The truth is that virtually all these businesses need to make money somehow. If they give

recommendations for a product, it’s very likely they’re being paid to do so.   

Plus, between Big Data and consumers’ willingness to share intimate financial information with so

many companies, it’s only a matter of time until someone decides to use that data against us. 

The point is that we shouldn’t fear technology when its capabilities to help us grow our wealth

far surpass the risks. But you, the consumer, have a responsibility to ensure you’re never taking

too many shortcuts and view every app, tool, and service with a critical, educated eye.

Andy Josuweit is the CEO of Student Loan Hero. He has been featured in Fast CompanyBusiness InsiderCNBC and Entrepreneur

Debug
In 2015, cybercrimals will target healthcare data
Your banking information? Home address? Social security number? You’ve been scared about losing these for years. Now, hackers are going to start targeting the little numbers inside your wearable.
From Our VICE Partners

Pure, uncut internet. Straight to your inbox.