Last year, financial technology (fintech) finally went mainstream. Here are some examples that underline my case.
Exhibit one: stockmarket indices. AI-focused equity indices had a superb 2023. Investment group WisdomTree, for instance, has an AI-focused exchange-traded fund (ETF) tracking a specialised index. In 2023 it rose by almost 50%. But the fintech news website AltFi runs a similar stockmarket index for global fintech firms. It gained nearly 60% last year.
Then there is exhibit two: AltFi runs an annual awards ceremony for the most innovative fintech companies. Can you guess which provider won the award for the best digital bank in 2023? Chase UK ( a brand also known as JPMorgan Chase) which happens to be one of the world’s largest banks and a late convert to the potential of fintech. Its digital banking app Chase has been an enormous success and is giving the likes of Revolut, Monzo, and Starling a run for their money.
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Exhibit three: buy now, pay later (BNPL). Wander around the high street in my small Hampshire town and you’ll see a new sticker plastered on most cash tills proclaiming that you can space out your payments using a BNPL app. The remorseless rise of BNPL has even attracted the attention of regulators worried about the rise of short-term debt among younger customers.
If fintech is going mainstream and everyone and their aunt now has a digital banking app of some kind – not to mention the long list of digital savings platforms that have hoovered up cash deposits – what’s left to innovate with, in the coming year? I would keep a watchful eye on the credit card subsector. New products such as the Curve app are emerging, heavily influenced by the BNPL movement, alongside more rewards-based ideas.
Opening doors
The ascendancy of fintech has also helped ensure that private investors have gained access to UK Treasury bills. The UK Treasury has long sold very short-duration Treasury bills to institutional investors (with a duration of a month for each bill). For many years, the interest rate on these bills was almost imperceptible, but now that we have entered an era of higher interest rates these short-duration bills are a worthwhile investment, with recent yields above 5%.
This is where the upstart online broker Freetrade comes in. Fresh from its campaign to ensure that UK investors can still hold fractional US shares within a UK individual savings account (ISA), the platform last month launched a service whereby UK investors can keep investing in UK Treasury bills on a rollover basis and generate a very secure, high yield. Democratising access to investments that were once the preserve of institutions is exactly the sort of innovation that fintech platforms were designed to provide.
This article was first published in MoneyWeek’s magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.