Traditional banking and other financial services are currently being challenged by fintech startups that are leveraging technology to improve financial services and deliver more value to customers at a lower cost.
Let’s take a look at 25 of the leading fintech companies that are giving consumers more access to financial services and greater control of how they manage their money.
Angel investors are wealthy individuals who provide seed money to startups in exchange for a controlling interest in the business. Traditionally, the business angel community has consisted of a few well-connected individuals. However, with the advent of online crowdfunding a new type of business angel is emerging; the retail investor. Below you will find three fintech companies that are transforming angel investing as we know it.
Online equity crowdfunding has become popular among private investors as it enables them to purchase small stakes in startups that could potentially turn into the next Apple or Facebook. Online crowdfunding is now responsible for 20% of all equity finance deals in the UK. Crowdcube is an online equity crowdfunding platform where private business owners pitch their company to investors who decide whether to fund them or not.
You can invest in any of the listed businesses with as little as £10. Once you place money into a business you acquire ownership rights and can participate in profit sharing through dividend payouts. For UK investors, there are also tax benefits they can enjoy by investing in companies on the Crowdcube platform.
With $2.6 million raised in venture capital funding last year, Funderbeam is using blockchain technology to power a next generation stock market.
“Funderbeam is the future of exchanges, combining three things in one: data, funding & trading, and it’s all happening across borders and on blockchain technology,” according to Funderbeam’s founder and CEO Kaidi Ruusalepp.
The Estonia-based startup allows users on its platform to buy digital tokens associated with the startups they choose to invest in. They can later trade them in an on-site order book. Funderbeam enables its users to make startup investments decisions by having an extensive database featuring thousands of investors and startups. Trading is free of charge and token holders are entitled to payouts when a company successfully exits, based on its current value.
Seedrs is an online platform that helps investors to find startups that they can invest in. A key benefit of the platform is people can invest as little as £10 and if the businesses don’t reach their funding targets the money is returned. The legal side of things is taken care of by Seedrs to ensure the investors have voting rights in the companies and receive constant updates. Seedrs verifies all information presented on the platform by companies so that users can make the right decisions based on valid data.
Bitcoin is a digital currency used for secure transfer of value to and from anywhere in the world and is not tied to any central authority. The cryptocurrency’s existence is enabled by the blockchain, which is a decentralized ledger that keeps records of all transactions that occur on the peer-to-peer network. The potential applications for blockchain, as the technology that underpins bitcoin are enormous ranging from powering cryptocurrencies, increasing transaction security and decentralizing markets.
Below are three bitcoin startups that are using bitcoin and blockchain technology to improve financial services for consumers.
Coinbase is the largest bitcoin broker in the globe supporting over 30 countries in its payment network. The San Francisco-based company offers a web-based and mobile wallet for both bitcoin and Ethereum’s ether. Users on the site can buy bitcoins through a connected bank account, credit card, and several other payment methods. To open an account all that is required is your name, verification of your email address and to accept the user agreement from Coinbase. The company charges a 1% fee for all purchases and depending on how much information you have verified you can buy up to $1,000 worth of bitcoins weekly. Coinbase has received backing from many trusted investors and is a regulated and licensed company.
Berlin-based Bitbond is a bitcoin-based global peer-to-peer lending platform that allows investors to place their money in small businesses in the form of private loans. Investing using Bitbond is quite simple with the minimum investment being 0.01 BTC. Credit profiles of the borrowers are available to the lenders and, of course, the higher the risk, the higher the rate of return on the peer-to-peer loans. There are no fees charged to the lenders. Borrowers, on the other hand, are charged fees depending on the duration of the loan with 3.0% of the loan amount being the maximum rate for a 60-month term loan. Applying for a loan is simple and fast and the maximum term length being 5 years.
Wirex, formerly known as E-coin, is the closest thing to a bitcoin bank you can find. Wirex offers a cloud-based digital currency banking platform, supporting payments in more than 30+ countries through its three main services, which include:
- Remittance services
- A bitcoin debit card (plastic or virtual)
- Mobile Banking
Users can make domestic transfers to their debit card accounts through any of Wirex partner banks around the globe. It also supports payments through various payment methods and is available in multiple currencies.
International Money Transfers
Fintech has had a profound impact in the international money transfer market. Banks and large money transfer operators such as MoneyGram and Western Union have been getting away with charging offensively high fees. Hence, customers welcomed the entry of new providers in this space. While banks are charging anything from $10 to $50 for international money transfers, fintech remittance startups you can save up to 90% on your cross-border transactions.
Below are a few examples of international money transfer services that are helping consumers save money on transfers and ensure the recipients get the funds as fast as possible.
The company works as a peer-to-peer currency marketplace, providing specialized international money transfer services for businesses and individuals. CurrencyFair supports payments in over 60 countries and aims to provide the best customer service experience for users.
The transfers can be done online or through its mobile app, which is available for both Android and iOS users. Transfers take 1-2 days to reach the recipient making it one of the quickest platforms for money transfer. To send money all you need is to open a CurrencyFair account, provide proof of identity and link it to your bank account.
Transferwise is a London-based international money transfer service that enables customers to save up to 90% on international payments. As an ardent fan of its money transfer platform, I would highly recommend it if you want an alternative to banks or traditional money transfer conduits.
Generally, the service is free and you only get charged on your international payments. The company places a £2 fee on transfers lower than £400. It has a minimum transfer limit of £1 ($1 for US users) making it one of the lowest in the industry. Transfers can be made in 38 currencies with the service available on its easy-to-use mobile and web-based app.
WorldRemit is an online money transfer service based in the UK. The company seeks to “get your money, to your recipient, however, they want it, whenever they need it”. The company enables you to send money to over 120 countries across the globe. It has a competitive fee structure and exchange rates making it a low-cost international payments alternative.
To sign up for WorldRemit is free and simple, and new users are entitled to a free, one-off money transfer to start off. What I like about WorldRemit is the broad range of currencies it offers and the various ways money can be sent. For example, you can send money for cash pickup or straight into a mobile wallet.
Some interesting facts about millennials are their willingness to spend on the finer things and the difficulty they face when it comes to saving. However, a series of new apps are promising to reverse the trend towards more saving. Micro-investing refers to saving small amounts of money on a regular basis that is then placed in an investment fund.
Acorns links spending with saving so that asset accumulation happens in the background. Its mobile app uses a round-up mechanism to facilitate its core function. The company monitors user’s credit and debit cards, and on each purchase they make it rounds it up to a dollar. For instance, if you spend $6.75 you will be charged $7, with 25 cents being deducted and placed into an investment account composed of low-cost ETFs. The company has also a cash back program where users are rewarded with cash in their investment accounts if they purchase products from Acorns partner organizations.
Stash Invest is one of the fastest growing micro-investing startups in the fintech industry. The company raised $9.25 million in series A funding, money that is meant to expand its user base and shift to a more data-driven investment model for its users. According to founder and CEO Brandon Kreig: “We are driven to educate people slowly and in bite-size chunks, because a lot of the financial jargon out there is confusing, and it’s a problem.”
The company lets customers invest as little as $5 to begin with and doesn’t charge users during an initial 3 month trial period. After the first 3 months, it charges a flat fee of $1 until your account hits the $5,000 mark. Above $5,000 it charges a 0.25% annual fee. Stash allows you to invest your cash into low-cost ETFs and into stocks, giving you to the ability to choose what securities you want to invest in.
MoneyBox is a UK startup that aims to encourage millennials concerned about their financial future to save and invest. The company acts as a piggy bank, rounding up spare change from debit and credit card purchases into a Stocks & Shares ISA. For example, if you buy coffee for £1.50 the MoneyBox app will recommend you save 50p. The choice to link it to as numerous bank accounts and round up multiple transactions is yours, with every single item you have purchased over the past week presented in the app. The three risk categories are cautious, balanced and adventurous and all three possible portfolios are composed of low-cost index-tracking ETFs.
The growing discontent with traditional banks and the rise of the fintech industry has led to the evolution of mobile challenger banks. These digital-only banks with their lean operating models are poised to be the future of the banking industry as they make banking simpler and more customer-friendly than ever before. Here are four emerging players in the digital banking space.
UK-based Atom Bank raised £135 million in funding from prominent investors in the financial services industry and aims to attract a young and more mobile friendly demographic to its banking platform. The Atom app offers paper-free account opening in a few minutes with face and voice biometrics incorporated to facilitate secure login into the app. The Bank has set itself a target of 5 million new customers in the next 5 years as it looks to offer affordable banking with none of the high street bank overheads.
The branchless digital bank Monese offers instant account opening through their Android and iOS app, whether a customer can produce a utility bill or not. This makes it a favorite for expats, immigrants, and nomads as all you require to open an account is an ID, an EEA address and be 18 years or above. Monese also offers low-cost international transfers and a Visa debit card.
Revolut’s goal is to democratize foreign exchange and, in this regard, they offer to exchange currency from pounds to dollars or euros at the interbank rate via the Revolut app. Users can send money to family or friends via the app, SMS or via email. Revolut also issues with a multi-currency card (MasterCard) so that you can spend abroad with no foreign exchange fees. Hence, Revolut has become very popular among frequent travelers. Revolut has expanded further by receiving a UK banking license and now also offers a mobile current account through its app.
Simple is another leading player in the digital banking space that is making great strides in the US. The digital-only bank offers mobile and online banking services, which include internet banking, budgeting and saving tools, a visa debit card and international money transfers for customers in the US. Above all, Simple stands out as it charges zero account fees.
Online trading has entered a period of great disruption. Armed with venture capital funds, a strong customer proposition, and free of legacy expenses, the fintech industry is competing on price as well as the ease of use. Three of the most interesting disruptors in the online trading space include the following:
eToro offers an easy-to-use social trading platform. Social trading refers to the copying of successful traders strategies and trades through the use of a social trading network to replicate their returns in a fully automated manner. This allows novice investors to replicate the performance of seasoned traders without having to possess much market knowledge.
Using eToro, users can trade in a wide range of financial instruments such as commodities, forex, indices, metals and stocks using CDFs. eToro even allows its users to bet on the price of bitcoin.
Motif Investing is a US online brokerage that offers the investing in theme-based baskets of stocks and ETFs that mirror the performance of specific areas you would like to invest in. The way motif investing works is you sign up to its online platform and choose which motifs you would like to invest in. Each motif features between 20 to 30 stocks or ETFs that follow particular themes. These can range from ‘Wearable Tech’, ‘Online Gaming World’ and ‘Caffeine Fix’ to ‘Too Big To Fail’, ‘3D Printing’, ‘Recent IPOs’ and many more. Once you have chosen the motifs you want to invest in, you can add and remove stocks in each motif to ensure that you are happy with your overall investment exposure.
Robinhood is a fintech company that provides commission-free trade of stocks to the masses. Trade commissions can easily chip away into profits, which makes Robinhood’s free trading app a game changer when it comes to stock brokerage. Users are able to enjoy commission free trading for over 5,000 shares and exchange traded funds. The app is ideal for investors who are willing to exchange a full-service trading platform for the opportunity to purchase stocks without fees. Signing up is easy and all that is required is basic information such as name, birthday, social security number, address and other demographic details. There is no minimum account balance unless it’s a margin account, which has a $2,000 minimum.
Peer-to-peer lending or P2P lending is a new way of financing that brings together borrowers, mainly SMEs and startups seeking a capital injection, and lenders looking for strong returns on their investment. Below you will find three leading players in the peer-to-peer lending space.
LendingClub is the leading online peer-to-peer lender in the US with more than $13 billion worth of loans processed through its platform since its launch in 2007. The company helped pioneer the P2P business model that matches borrowers with investors who are willing to fund their loans. The minimum loan amount you can borrow is $1,000 while the maximum is $40,000. The APR range is 5.99% to 35.99% and the loan duration is typically 3-5 years. To qualify for funding you need a minimum credit score of 600 together with a good credit history spanning several years.
If you are looking to expand your small enterprise or are looking to refinance debt to free up capital for business growth, Funding Circle is a great option. The company provides quick funding and competitive rates and is a good bet for businesses with solid financials looking to expand. It only takes 10 minutes to apply for funding through its online platform and borrowers can receive the funds within 10 days. The company offers APR rates ranging from 7% to 36%.
Founded in 2009, the Estonian company Bondora has processed 1 billion euros worth of loans to date. The peer-to-peer platform is accessible to investors in Europe with loans being served in Spain, Finland, and Estonia. Bondora has a clean easy-to-use interface making it easy for investors to find loans they want to invest is. Once you sign up your account is credited with €5 to get you started and you have the potential to get up to 10% returns annually.
Wealth management is becoming increasingly automated in today’s fast-changing financial landscape. Web-based and mobile applications allow you to manage your investment portfolio with a click or the touch of a button. Currently, online wealth management services or ‘robo-advisors’ are offering less expensive ways to start and maintain your investment portfolio. Examples of leading robo-advisors include:
MoneyFarm is a UK robo-advisor that seeks to make investment more accessible for new investors and simplify the process for more experienced investors. Like other robo-advisors, MoneyFarm invests customer funds into portfolios that match your risk profile and financial goals. Signing up is easy and you only have to answer a few questions to aid the algorithm in coming up with a perfect portfolio for you. There is no minimum amount required to invest in the platform and there are zero annual fees if you invest under £10,000.
Betterment offers a good entry level platform for new US-based investors who want to start investing to accumulate wealth. Customer’s funds are invested in ETFs portfolios that focus on saving for college, retirement or buying a house. Betterment has no rebalancing or minimum balance or transactional fees but deposits must be above $10. Investors can choose from among the 12 global asset classes on the portfolio side.
Swanest is a new investment platform that aims to combine D.I.Y investing with robo-advice by deploying automation and algorithms to empower self-directed investors in building and maintaining personalized investment portfolios. Compared to other robo-advisors, Swanest is not selling model portfolios but instead helps investors to build truly personalized investment portfolios. Swanest closed a €750,000 funding round in late 2016 and is set to launch its intelligent investing platform in the first half of 2017.
Fintech startups are not only disrupting the financial industry but are making traditional financial players to rethink their old business models and come up with new ways of delivering service and value to customers. If you want more control over your financial future, check out any of the above startups or apps and discover new ways to manage your finances.