Why should you use Fintech?

The summary

Fintech is here to stay. Fintech startup companies are growing fast. It’s a good thing that the Fintech innovation challenges the old financial institutions. They have to adapt to the new tech focusses financial companies. The Fintech landscape will change in the next years.

If you want to get a new digital bank account, we advise 2 banks.

1. Revolut
2. N26

Both offer banking, but differ in the way how they operate. N26 has a decent and solid feel to it. Revolut has a more pioneer feeling to it. Both are solid choices and exist for quite a while. There are a lot of other banks as well, but we don’t have any experience with those.

	N26	Revolut
Bitcoin and others	No	Yes
Credit cards	Yes	Yes
ID verification	In-app video call	In-app photo transfer
Support	app, email, phone	in-app chat only
Account types	Personal or Business	Personal and Business
Merchant accounts	No	Yes
Team accounts	No	Yes
Medical insurance	Yes	Yes
Travel insurance	Yes	Yes
Transferwise	Yes	No
Stock trading	No	Yes
Apple pay	Yes	Yes
Google pay	Yes	Yes

Bonus tip is Juni. This startup targets digital entrepreneurs. If you have experienced PayPal account blocks, this can be the solution for you. This can happen if you use Shopify.

What Is Fintech or a Fintech bank?

Fintech stands for Financial Technology firms. Or shortened to Fintech. It’s an innovation in the banking industry. It’s a digital bank and a digital financial services company. It’s the tech industry taking over the financial industry. At least that is what they are planning to.

Fintech is a business that offers financial services. Or banking services like traditional banks. The major difference is that they build the Fintech ecosystem around IT processes. Such businesses have more IT staff than actual financial or banking experts. Consumers or users can use Fintech services with mobile apps or a website. There are no offices and support is available by chat, chatbots, email, or phone. This way of working saves a lot of traditional banking costs.

The mobile banking app has to work with all the devices customers use. The banking app is the only way to have access to your account. The app offers the tools to do the management of your banking tasks like transactions. The in-app options can differ between Fintech companies. Always read reviews or user experiences before opening up an account.

What is the difference between Fintech and banks?

Fintech is the new kid in the financial services industry causing a disruption? The major difference is that a Fintech is a more tech company compared to a traditional bank. It is in fact more a technology business than a bank. It provides financial services using the software.

Traditional banks like Bank of America rely on clients to save, pay and keep their money. Because of their traditional role, they are the backbone of a country. A central bank monitors the banks and determines interest rates. Commercial banks earn money by providing loans and mortgages. They earn on the interest.

Fintech companies also rely more on social media platforms for advertising. They can use their digital knowledge for insights across platforms. Resulting in better advertisements across platforms. The tracking for advertising is resulting in lower ad costs. Lowering fees for users. As a user or consumer, you can always opt-out with browser cookie settings.

Can Fintech replace or affect banks?

Not completely. The whole Fintech concept is still new. Consumers prefer the trusted and proven method of traditional banks. Switching banks is a bit more common, but consumers usually are loyal to their banks. Banks offer a broader range of financial services and products.

The Fintech banks offer a more basic package as an account with physical or virtual credit cards. For clients, these basic banking services are enough. But for middle and larger companies, it isn’t. Those businesses or corporate banking need a lot more expertise. Business owners with simple financial structures like small businesses can also benefit. So banks will stay and Fintech will exist next to each other.

What will the future of the banking sector look like?

Fintech firms are here to stay. It’s growing and existing banks can back up Fintech companies. Existing banks can’t change at the same rapid pace as new Fintech businesses. Because of their old business model. That is why existing banks back up or working together with Fintech start-ups. Both can share their knowledge and grow together. Banking customers can benefit as there is healthy competition. So it offers new opportunities for the financial sector.

Some traditional banks will buy Fintech start-ups. Buying the technology so they can use it for their growth.

The demand for Fintech will grow. When clients embrace the new financial technology industry, traditional banks will lose customers. So they have to adapt. The Fintech revolution has begun.

What are the advantages or opportunities of Fintech?

As Fintech companies don’t have offices, they save on resources. Making the fees lower. Another advantage of most digital banks is that they offer lower exchange fees. This is interesting for those who exchange foreign currencies or for traveling. As Fintech businesses are smaller, they are more agile. They can change their model quicker. It’s easier to change online banking than it’s to change traditional banking systems.

Fintech also operates in the trading or stock market. Using technology services like blockchain technology and ledger technology. They are offering new financial platforms. So you can also buy and sell virtual currencies like bitcoins. Lower costs and fees are always an interesting thing to investors.

You will also find Fintech is the insurance. Also, applying innovations using technology for insurances. While lowering fees and offering the same insurance services.

So the financial services sector gets innovated by the new financial technology companies. It will affect the services to consumers. You can still question if this is a good evolution, as it has a less human aspect to it. Especially if you can only have a chat or email contact.

Which risks do I have using Fintech?

Fintech provides financial services. So the banking rules and federal banking law also apply to Fintech companies. They also function as credit card companies. But Fintech credit cards are not traditional credit cards. There is no loan on them. In fact, they are debit cards. This means you can’t overspend. When your balance is almost zero, you can’t do any digital payments. This is a major difference. You can use this knowledge to your advantage.

Also, Fintech companies operate using a more basic banking charter. They offer basic services, so a basic charter is enough. The Office of the Comptroller of the Currency (OCC) created a Fintech charter for this purpose. This applies to the U.S.

For Europe, a central bank has to provide a banking license to do any banking activities. The central bank assures the financial regulation. In the end, they handle a healthy financial sector and financial stability.

Central banks, other financial authorities, and banking regulators also watch Fintech banks. So it’s quite safe as long as the Fintech company applies to all those rules and regulations. You can always verify if the Fintech banks are in fact licensed banks.

How can major banks compete with Fintech startups?

Major banks have challenges innovating their traditional banking services. Banks offer an app, but their backend processes and systems are still on old technologies. It takes a lot of work to redesign it. They can still learn how Fintech uses innovation. Apply those tactics if a bank can apply them. It’s a slow step-by-step process.

Still, banks don’t have to worry about a lot of clients switching to Fintech companies. It’s too new for most clients. Most clients question how legit Fintech companies are. So they rather stick to a traditional bank. But it is a matter of time until the clients will switch over to a Fintech company. You can also have a Fintech banking account next to your existing bank account.

Some traditional banks have banking partnerships with Fintech companies. It is a simple way for traditional banks to join the digital innovation party. The bank partnerships need an investment of both parties. But they both gain knowledge. The Fintech company can learn about the traditional bank branches.

How secure is banking with Fintech startups?

Security is the most important, as you don’t want to have others access your bank account. The most tricky part is opening an account. The bank needs to use official identification like a passport. This also makes the process tensed as you are sending your passport details to a bank over the internet. Some banks use artificial intelligence to verify your passport scan. You can use the app to take a picture. An AI scan approves or rejects the picture.

Another method is a video call using the app. The person will instruct you on what to do. They will take a picture and scan your passport. After verification, you will get access to the app. And they sent a physical credit card by mail.

How easy is it to use a digital bank?

You can manage all your banking and finance using an app or a website. The mobile app also provides mobile payments. When your phone offers NFC, you can use your phone to pay.

In the app, you can create virtual credit cards. This is a safe way to do online payments. You can delete the credit card when you finished. In case the company has lost your credit card details to hackers, the hackers can’t do anything. Your credit card is useless for them.

In the app, you can buy stocks or digital currency. Do some trading on the financial markets. It is very easy to start as an investor. Make sure you have enough funds in your account. When your account is out of money, you can’t do anything. There is no loan.

What happens if a Fintech “bank” goes out of business?

Worst case, you lose your money. A traditional bank can take over the bank accounts. This happens when the traditional bank has a banking relationship with the Fintech company. You can always check if the Fintech company has a banking license. If so, the central bank can also help.

Which Fintech banks can I use?

1. Revolut
2. N26

Revolut

Revolut headquarters is in London. Because of the Brexit, they had to create a European branch. So they started a branch in Lithuania. That is why the European IBAN accounts start with LT. They have expanded to the US offering the same services.
A free Revolut personal account features:

1. Mobile payment
2. Credit cards, both physical and virtual
3. Financial advice for kids. You can open a child account.
4. Payment analytics. You can track your account and fund.
5. Donate money in-app. Easy to donate to charities selected by Revolut
6. Gifts. Sending money to others with a personal gift message
7. Medical or device insurance.

With a paid account, you also get Smartdelay and lounges. Smartdelay tracks your flights. Paid accounts can be premium or metal.

Revolut business offers some interesting features

1. Many team members. They can have access to the Revolut Business account with their own credit cards.
2. Merchant account. This is interesting if you use a payment processor like PayPal or Stripe. Revolut offers merchant accounts. Discounts on selected services or products.

You can have both a Revolut personal and Revolut business account. Revolut doesn’t have phone support. They only offer support in-app or on the website.

N26

N26 headquarters is in Berlin, Germany. The app has a decent look and feels to it. N26 has a german banking license. So it’s a safe choice. They started in the US as well.

N26 offers personal accounts and freelancer accounts. You can only have 1 account.
The free personal account features:

1. Mobile payment
2. credit cards, both physical and virtual
3. Discounts on selected services or products
4. Phone support

The verdict

We prefer Revolut as they are innovating faster than N26. They have a lot more features. They add more features more frequently than N26. They only provide chat support. If phone support is important, you can go for N26. Fewer features, but decent and great phone support.

Bonus Tip

One bonus tip for digital Entrepreneurs is to keep watch on Juni. This is a new Fintech startup started by former eCommerce entrepreneurs. They want to solve the struggles that digital entrepreneurs often encounter, like frozen PayPal accounts. It’s in beta, you can check it out. So if you are using Shopify, be sure to check them out.