Date: 2013-08-13

The Power of Financial-Technology Start-Ups

A new wave of start-ups are forever changing the way people view the borrowing and saving of money. These financial-technology firms, or fin-tech firms, are gearing away from large corporations, such as Western Union, and are now relying on safe technology to enhance the financial world from the comfort of their warehouses. The many rising firms are reaping in the profits, while simultaneously sparking interest in investors and challenging the institutions that have reigned over the financial world for years.

Several start-ups have proved that the excitement may be warranted. A San Francisco firm, named Xoom, specializes in sending small amounts of money across borders. They collect the money online, use new, safe technologies to minimize fraud, which enables them to cut fees used by corporations. Similarly, a British fin-tech firm, Wonga, specializes in making short-term loans at outstanding interest rates. This firm is rapidly expanding thanks to technology that analyzes mass amounts of data, allowing the loaning of money to be virtually instant. The excitement surrounding these companies has venture-capitalist firms scouring to find the next fin-tech sensation.

One of the biggest factors that led to the rise in these firms was the diminishing trust in big banks due to the financial crisis a few years back. Also, years of low interest rates have pushed savers to search for more favorable rates in these young firms. Similarly, the rise in smartphones enables the quick way to receive or transfer money, making start-ups simpler.

Yet these fin-tech firms are not without barriers. Most notably, trust from customers, considering not everyone is comfortable entrusting their savings to a new firm that exists in a warehouse. Although, this has not seemed to inhibit the growth of these firms, and they will continue to change the financial world that everyone has become so accustomed to.

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