Personal finance involves managing your income according to your financial situation and ensuring you meet your financial goals. It encompasses saving, budgeting, investing, mortgages, taxes, retirement, and estate planning.
Far from an arcane domain reserved for the savvy elite, personal finance is a concept we apply to our everyday lives. We make monetary decisions in the household and decide how to allocate resources for ourselves and our families. We must train ourselves to become financially astute to maximize our income and savings.
Lately, personal finance has evolved from complexity to accessibility. What was once considered difficult to understand among ordinary people has evolved into a realm of democratized access. From cash, checks, and personal visits to the bank, we’ve moved on to apps and platforms that educate and empower us.
Here, we trace the journey of personal finance’s technological revolution. We evaluate how fintech tools have turned ordinary savers into savvy financial managers and investors.
Gone are the days of tedious paperwork and long queues at brick-and-mortar institutions. The advent of online personal finance services has ushered in a new age of convenience, accessibility, and empowerment for individuals seeking to take control of their financial futures.
The Birth of Personal Finance Software
The earliest personal finance software emerged between 1980 and 1983. The first programs were electronic checkbook “add-ins” for spreadsheet software. They progressed to include well-automated financial management functions and became standalone programs.
Pioneers in the personal finance software industry included Intuit’s Quicken and Mecca’s Manage Your Money. Microsoft Money followed in 1992. As of 1998, there were over 12 million personal finance software users. Quicken and Money then dominated the market.
The early products already came with functions we see now, albeit in more simplified versions. They included features like automated assistance, online tutorials, links to relevant websites, instant reports, and personalized advice based on user input.
Budgeting improved tremendously, with features like transaction splitting among several categories, automatic setup of budget accounts based on the previous year’s input, and automatic creation of preliminary budgets based on prior data. We also saw checking and bill-paying functions tracking multiple bank accounts, reconciling bank statements, links to credit card statements, bill reminders, and bill-paying services in tandem with middleware vendors.
Personal Finance Today: An Era of Rapid Fintech Advancement
While personal finance services and programs existed for decades, it wasn’t until the widespread use of the internet that they really took off. Online personal finance also thrived in the face of better hardware and software, propelled by the global increase in smartphone use.
By 2022, global smartphone users were estimated to be over 6 billion or 83 percent of the world’s population. The ubiquity of smartphones fueled the use of personal finance tools as they became more accessible in the form of apps and digital platforms. With improved user-friendliness, consumers have discovered the benefits of managing their personal finances using digital tools.
Fintechs are also competing in this market. According to Statista, the global personal finance market is expected to reach $1.57 billion by 2026. Revenues are expected to reach $1.69 billion by 2030.
The technological race within this competitive environment has given rise to many innovations. Besides the internet, cloud computing contributed significantly to the industry’s transformation. Users can access financial information from anywhere in the world. Software providers created new mobile applications to facilitate this on-the-go financial management culture.
Novel Fintech Services: From Digital Banking to Automated Investment
The capabilities of fintech apps have expanded through the years. We have witnessed the emergence of neobanks and challenger banks, challenging the position of the traditional banking system by catering to those overlooked by high-street institutions.
We have also seen the rise of independent fintech companies, promising to disintermediate the banking industry and offer more consumer-friendly finance services. Novel fintech services promise to revolutionize finance and provide diverse options for consumers, empowering them to take charge of more aspects of their finances.
The following are examples of services that have been disrupted by fintech, leading to the surge of users in online personal finance:
Online Banking
Online banking is the most well-known fintech innovation. It has transformed the way we interact with our finances. Instead of handling cash or making frequent visits to brick-and-mortar banks, we can now open accounts, access our funds, transfer money, pay bills, and apply for various loans with a few simple steps on our smartphones.
The proliferation of digital banks has compelled traditional banks to reevaluate their strategies and raise the bar for customer experience. Digital or online banks’ customer-centric approach has enhanced user experience, as demonstrated by personalized services, rapid response mechanisms, and streamlined interfaces.
Digital innovation, as pursued by these new banks or entities, has pushed the limits of traditional banking, addressing niche markets and increasingly becoming more attuned to underserved customers. It has also increased security and transparency in many ways.
Student loan refinancing
Today, many individuals and families are saddled with student loan debt. Online platforms offer alternatives to traditional lenders, who may charge high interest rates and provide inflexible repayment terms.
Fintech provides innovative solutions by delivering accessible student loan refinancing through easy-to-use platforms. These new sites and apps allow borrowers to refinance student loans, usually at lower interest rates and better terms overall, saving thousands of dollars over the life of the loan. Technology speeds up the application process and also helps reduce fees.
Trading and investing
Once the exclusive turf of savvy Wall Street insiders and professionals, new platforms like Betterment and Robinhood have democratized the trading and investing world. Such platforms offer stocks, ETFs, IPO investing, and other services accessible through a laptop or mobile device.
Comprehensive financial services platforms like SoFi offer commission-free trading, fractional shares, and a suite of alternative investments like commodities, pre-IPO unicorns, venture capital, and more to help grow and protect wealth. You get an open trading account by signing up on their platform, giving you access to various investing opportunities. Moreover, using robo-advisors allows you to open a portfolio without the management fees.
Artificial intelligence (AI) and machine learning (ML) in fintech apps
According to Statista, global digital banking users will reach 3.6 billion this year, 2024. In addition, the number of US mobile banking users has hit 73 percent of the total population, according to the Federal Reserve. The growth in users has partially been attributed to improving customer services due to AI.
AI helps with personalized inputs on financial management and complaint resolution. AI chatbots, for example, help both the business and the user. They schedule and automate transactions, fetching past transaction details and diverting them to live agents if needed.
AI-powered personal finance managers, or PFMs, are integral to banking applications and digital wallets. They work behind the scenes to analyze transactions and generate insights about financial behavior—spending and saving habits, for example.
These PFMs provide smart suggestions on areas where you must save or allocate more. They give a bird’s eye view of a user’s daily financial transactions.
Leverage Online Platforms To Improve Your Personal Finances
Online personal finance platforms put the power of financial management in the hands of users. Many fintech sites and apps address your needs, whether online banking, student loan refinancing, trading, investing, or access to peer-to-peer lending.
Online platforms offer distinct advantages like higher yield on savings and checking accounts, savings automation, and payments automation. They also bring new technologies like robo-advisors or algorithms to simplify investment, customizing portfolios according to user’s preferences and automatically rebalancing them. With online financial services, you can also get better terms on a loan through consolidation or refinancing.
With all these benefits, consumers should consider switching some or all of their financial services to these new platforms, leveraging every advantage to make financial management more effortless.
